Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — TRADE AND INDUSTRY

GATT

Mr. Dunnachie: To ask the Secretary of State for Trade and Industry if he will make a statement on progress made in the GATT Uruguay round.

Mr. Waller: To ask the Secretary of State for Trade and Industry if he will make a statement about the prospects for resumption of negotiations on the Uruguay round of GATT.

The Minister for Trade (Mr. Tim Sainsbury): The Government greatly welcome the recent resumption of negotiations in the GATT Uruguay round. We hope that the negotiations can now be brought to a successful conclusion as soon as possible. We should like all parties to commit themselves to a deadline of not later than the end of the year.

Mr. Dunnachie: When does the Minister believe that the European Commission will agree to a new negotiation position on agriculture? What is the United Kingdom's position on the reduction of subsidies for agriculture exports? Does the Minister agree with the Italian Trade Minister, who said that the system of negotiation in Europe is completely hopeless? If he does agree, what does he propose to do about it?

Mr. Sainsbury: The hon. Gentleman may know that the Commission has accepted a work programme involving negotiations to achieve specific binding commitments on three issues—internal support, market access and export competition. That is what the United States and the major agricultural exporters wanted. I believe that the offer provides considerable scope for the negotiations to move forward to a successful conclusion as soon as possible.

Mr. Waller: As serious negotiations are not expected to start until June and may not be completed by the end of the year, does my hon. Friend agree that it would be appropriate to extend MFA 4 for a further 17 months? We should bear it in mind that the bilateral agreements that will run out at the end of the year essentially depend on MFA 4, which runs out at the end of July. Many of our European partners and the United States agree that there should be no further concessions on MFA 4. Does my hon. Friend agree that that should also be our position until the new GATT arrangement is entered into?

Mr. Sainsbury: I assure my hon. Friend that serious negotiations are under way, although they may not bring in the most difficult political decisions until June. I also assure him that we all recognise the need to extend the multi-fibre arrangement in the light of the failure to agree in Brussels last December. However, I would not go as far as to say that an extension of 17 months would be justified now. It is important and necessary to bring the negotiations to a conclusion as soon as possible; there are dangers in not doing so. In those circumstances an initial extension of, say, five months would be more appropriate.

Mr. Madden: Given that 400 jobs a week have been lost in the clothing and textile industry in the past 12 months, will the Minister give a firm assurance along the lines of the one that he has just given? As textile workers are not only workers with a vested interest in the future of the industry but consumers too, will he make it clear that, if 10 Downing street or the Treasury has any thoughts about extending VAT to children's clothing, they will be strongly resisted by his Department?

Mr. Sainsbury: I am glad that the hon. Gentleman recognises that all his textile workers, indeed all his constituents, are consumers, because consumers will be the main beneficiaries of a successful outcome to the Uruguay round. We recognise the importance of the textile industry and that is why we welcome the progress that was made last year in the negotiations on textiles, particularly the progress in providing better mechanisms and disciplines for the GATT round, which we have always said must accompany the incorporation of textiles into the GATT.

Telecommunications

Mr. Tim Smith: To ask the Secretary of State for Trade and Industry what assessment he has made of the impact that the introduction of the ending of the duopoly in telecommunications, as outlined in his Department's recent White Paper on telecommunications policy, will have on consumer choice.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Peter Lilley): The Government's telecommunications policy will ensure that consumers have the widest possible choice of high-quality services at the most competitive price.
There will be a wider choice in all aspects of telecommunications from equipment and services to networks themselves.

Mr. Smith: Has not there been a remarkable transformation in telecommunications over the past decade? Does my right hon. Friend recall that only 10 years ago there was only one supplier of telephones and telephone services and that people sometimes had to wait for weeks or months to get a telephone? Today, any number of companies are providing hardware and telephone lines. Is not that a substantial endorsement of the policies of deregulation, liberalisation and privatisation which the Government have followed?

Mr. Lilley: My hon. Friend is absolutely right. I recall that at the beginning of the last decade, when British Telecom was still nationalised, about 250,000 people were waiting for more than six months to have lines installed. I am glad to say that the number of people in such a position now is negligible. Not only have the changes been


dramatic over the past decade, but, as a result of the liberalisation that we have announced and the greater competition and choice, we foresee even greater changes in the coming decade.

Mr. Henderson: Will the Secretary of State be honest enough to admit that selling further British Telecom shares has nothing to do with more competition, nothing to do with addressing the 500,000 complaints that British Telecom receives every year or securing the necessary research and development to ensure that new technology is available and that mobile phones will work, and nothing to do with increasing telephone ownership or obtaining more investment, but everything to do with failed dogma and raising money? The Government are going for the loot to try to solve the poll tax fiasco.

Mr. Lilley: I welcome the hon. Gentleman's question and the prominence that he gives to the Labour party's love of state ownership and its desire to restore British Telecom to nationalised ownership. Nationalisation has nothing to do with choice, the consumer or creating a dynamic industry such as we have created. It would certainly not have made this country the telecommunications hub of western Europe which it has become, with major companies moving their telecommunications headquarters from north America to London to take advantage of the liberalisation that we have created.

Mr. Gale: Is not there tremendous potential for the development of telecommunications and for the creation of jobs in telecommunications, voice telephony, data and entertainment? Will not that be a growth area in which Britain can take a tremendous lead? Would not the Opposition's plans to renationalise British Telecom destroy those prospects?

Mr. Lilley: My hon. Friend makes a good point. The jobs created by the proliferation of services built on the back of a liberalised telecommunications regime are important. We already have value-added services on the network, double those of France and Germany, and I foresee a great new source of jobs in the cabling of Britain through the cable television networks as well as an increase in the number of trunk networks following the end of the duopoly regime.

Shipbuilding

Mr. Leadbitter: To ask the Secretary of State for Trade and Industry when he next plans to meet the European Commissioner, Sir Leon Brittan, to discuss shipbuilding within the United Kingdom and the EC.

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Edward Leigh): My right hon. Friend the Secretary of State will meet Sir Leon Brittan on 22 March to discuss a number of issues. I shall be seeing him tomorrow to discuss shipbuilding issues in particular.

Mr. Leadbitter: I am glad that the Secretary of State is to see the Commissioner tomorrow to discuss various matters. Is the Minister aware that, as recently as 5 March this year, Lloyd's List published an account showing a dramatic 80 per cent. decline in British shipbuilding in the past decade? Is he aware that Denmark, Italy and Germany have increased their share of the world market in

shipbuilding orders, whereas British shipbuilding's share has shrunk to 0·77 per cent? Bearing in mind today's calamitous news about shipbuilding in Barrow-in-Furness, what does the Minister propose to do to encourage our shipbuilding industry, which is one of the finest in the world, to expand? Or is he going to sit on his backside and let the industry decline further?

Mr. Leigh: The hon. Gentleman's latter point was the serious part of the question. I was sorry to hear the news from Barrow today which is, of course, the result of the company's need to restructure and improve its competitiveness in the face of changing defence requirements. I shall be visiting Barrow on Monday and I shall be able to see at first hand the nature and scale of the problems facing British Shipbuilders Enterprise Ltd. and their likely impact on the local community.
I repeat that I shall be seeing Sir Leon Brittan tomorrow and I shall discuss with him the aid that we are allowed by the Commmission to give to British shipbuilding. Given that British shipbuilding has restructured so successfully over the past 10 to 15 years—it is now more competitive than it has ever been and is well placed to take advantage of the recent upsurge in shipbuilding orders worldwide—it is clearly in the interests of British Shipbuilders that we phase out subsidies as soon as we can and I shall continue to urge the Commission to do just that.

Mr. Hill: Does my hon. Friend recall that some years ago—before he was a Minister—there was a European scrap and build scheme, aimed mainly at the safety factor of merchant shipping? In his discussions with Sir Leon Brittan, will he explore the possibility of any part of such a scheme being used to support some of Britain's shipbuilding potential? Rather than wasting vast sums on some social scheme or other, the European Community might introduce a scrap and build scheme to which all the nations could agree.

Mr. Leigh: That is an interesting suggestion. I shall certainly examine it carefully and, if appropriate, raise it with Sir Leon tomorrow. The Commission permits us to put a subsidy of 13 per cent. on large ships and we subsidise large ships to the maximum extent that we are allowed. I will pursue with Sir Leon any other ways in which we can help British Shipbuilders.

Ms. Quin: Will the Minister give a clear undertaking to discuss with Sir Leon——

Mr. Skinner: They have given money to Germany.

Mr. Holt: Shut up.

Mr. Speaker: Order. I think that it is better left to me. Ms. Quin.

Ms. Quin: Will the Minister give a clear undertaking that, when he meets Sir Leon Brittan, he will discuss the catastrophic job losses in Barrow? Will he confirm that, unless action is taken, the losses are likely to occur within two years rather than four years? Can he give the workers in Barrow any hope that some of them will retain jobs in the merchant shipbuilding sector, or does he propose simply to let the decline in that sector continue, as my hon. Friend the Member for Hartlepool (Mr. Leadbitter) suggested?

Mr. Leigh: I have already said that I shall be raising a number of matters with Sir Leon Brittan tomorrow. I gave a full answer to the earlier question and I have nothing to add—except that we understand that the job losses will take place over four years. I repeat that they are the result of the restructuring deemed necessary by management in the face of changing defence requirements.

Credit Lending

Mr. Andrew Smith: To ask the Secretary of State for Trade and Industry what further steps are being taken to curb irresponsible credit lending.

The Minister for Corporate Affairs (Mr. John Redwood): The Government set out in December 1990 proposals for improved regulations on credit marketing and I am sure that my hon. Friend the Under-Secretary of State for Industry and Consumer Affairs will take the hon. Gentleman's comments as a reply to the consultation document.

Mr. Smith: In view of the mounting misery caused by irresponsible lending, with mortgage repossessions doubling last year and with the Oxford money advice project in my constituency reporting default actions up by 10 per cent., bailiffs' warrants up by 16 per cent. and bankruptcy petitions up by 88 per cent., is not it time that the Minister took some action? Should not he also launch a rescue package for the many advice centres facing closure as a direct consequence of the Government's poll tax capping policy—in many cases, leaving the people in the deepest debt with nowhere to turn?

Mr. Redwood: I have just told the hon. Gentleman that the Government have taken action. We have set out proposals to make it clearer to those entering into credit agreements what the rate of interest would be and what the impact would be on their family budgets. I am sure that the hon. Gentleman would welcome those proposals if he read the document and saw what the Government were trying to do. The Government also support various schemes to help those involved in offering advice on consumer debt. That is part of helping the market work. It is most important to have clear disclosure to all those thinking of embarking on new debt and that is precisely what the proposals set out in the consultation document do.

Mr. Nicholls: Although I dismiss the nonsense that we have just heard from the hon. Member for Oxford. East (Mr. Smith) and pay credit to the steps that the Government have taken in this area, I continue to receive examples in my constituency of offers of credit that are clearly irresponsible and should not have been made. Does my hon. Friend accept that sometimes there is such a disparity in the bargaining position between lender and borrower that the matter must be kept under review? Despite the steps that have already been taken, will the Government continue to keep the matter under review and respond to individual cases that might be drawn to their attention?

Mr. Redwood: My hon. Friend can have that reassurance. Of course, the Government are watching the matter closely and are involved in consultations with regard to proposals that we believe will go a long way towards remedying the defect that my hon. Friend recognised. In the pre-agreement phase it is most

important that the consequences of that agreement should be clear to individuals so that they can understand what impact it would have on their family budgets. I am worried about Labour's proposals, which seem to suggest that people should not be able to borrow in certain circumstances. That could make their position far worse. We want to see responsible borrowing based on a sensible regime of disclosure of the consequences to those thinking of entering into agreements.

Mr. Nigel Griffiths: Why have the Government failed to implement the proposals in the 1988 White Paper to protect the public against irresponsible extortionate credit deals? With 170,000 people unable to pay bad debts to five and more creditors, why are not the Government commissioning a report from the Office of Fair Trading on extortionate credit agreements?

Mr. Redwood: The Government are consulting on all those matters at the moment. The hon. Gentleman is quite at liberty to send in his views, which we should be most interested to see. The action that we propose addresses the very issue about which the hon. Gentleman is worried. It would cover advertising and the agreements themselves and deal with matters such as sending details to minors, which we believe is quite wrong and about which there are recommendations in the consultative document. Will the Opposition please read the consultative document and give us the benefit of their advice on it?

Mr. Alton: While welcoming the consultative document and the remarks that the Minister has just made, may I ask him to accept that the phenomenal growth of consumer credit from £15 billion to £50 billion this year, coupled with the growth of credit cards—2 million are available in Germany compared with 30 million in this country—requires rather more than simply responsible borrowing and probably requires tighter controls on the kind of credit facilities that can be made available? Many families, especially poorer ones, are becoming increasingly indebted and 2·5 million families are now in serious debt.

Mr. Redwood: The savings ratio has been rising. All Conservative Members welcome that and it shows that the balance between saving and borrowing is improving in the way in which the hon. Gentleman suggests. Is the Liberal Democratic party really suggesting that people should not have access to credit on any basis? Is the hon. Gentleman aware that 84 per cent. of personal borrowing is in the form of mortgages, not in the form of credit cards? The main factor in any credit increase is mortgages, not credit cards.

Mr. Batiste: Will my hon. Friend rule out of his consultation exercise at this stage any possibility of introducing credit control curbs along the lines advocated by the Opposition? Would not they reduce the amount of credit and competition available for the mass of responsible borrowers and also destroy the credibility of United Kingdom financial institutions, thus making a free gift to their overseas competitors?

Mr. Redwood: My hon. Friend makes two extremely powerful points. The Labour scheme would not work, because there would be ways of borrowing from banks outside our jurisdiction. However, to any extent that it was effective in limiting some people in gaining access to borrowing, it could be an extremely cruel scheme. People


need to borrow. We are trying to make sure that they do so on an informed basis, aware of what impact it will have on their budgets, so that they can come to sensible decisions before committing themselves to undesirable borrowings.

Electricity Prices

Mr. Martyn Jones: To ask the Secretary of State for Trade and Industry what discussions he has had with large industrial users of electricity regarding the proposed increases in electricity prices.

Mr. Redwood: My right hon. Friend the Secretary of State for Energy has met the chairman of ICI to discuss that problem. My right hon. Friend the Secretary of State for Trade and Industry would be happy to hear further representations, but the main responsibility rests with the Department of Energy and with the regulator of electricity.

Mr. Jones: Of course, the main responsibility rests with the Department of Energy, but I am sure that the Secretary of State for Trade and Industry would be concerned about the effects on large industrial users of increasing electricity prices—much above the already scandalous 13 per cent. being charged to domestic consumers. Is the Minister concerned that that rise is due to the privatisation of a service industry and that, far from helping British industry, it is nailing British manufacturing industry to the wall?

Mr. Redwood: I do not agree that that is the result of privatisation. It is the result of the costs of generating power and the allocation of those costs to larger industrial users. The hon. Gentleman might like to know that our energy costs for large industrial users are below those of Germany, one of our main competitors.

Mr. John Browne: Will my hon. Friend confirm that companies are free to negotiate price with the electricity companies and generators and, furthermore, that electricity companies are free to offer discounts or even cash rebates to companies or individuals who invest in energy-saving measures?

Mr. Redwood: My hon. Friend makes good points. Of course, the idea of opening the market to competition is that large industrial users can think of other ways of gaining the power that they need by involving themselves in generation schemes or by encouraging new generators to enter the market. That is exactly what will happen. I am sure that the hon. Member for Clwyd, South-West (Mr. Jones) will welcome the progress that has been made in letting industry have more choice and control over power sources, quality and price.

Mr. John D. Taylor: Does the Minister accept that in Germany 35 per cent. of energy supplies benefit industry because they come from lignite mines near Bonn? Does he further accept that British industry would have considerably reduced electricity costs if we developed the lignite mines in the United Kingdom? Such resources would provide much greater energy than those in Iraq.

Mr. Redwood: The Government welcome the development of any energy sources that improve the supply and cost of energy, subject to the normal planning constraints and the energy policy laid down by the Department of

Energy. I am sure that in the new competitive conditions in the energy market more innovation will be a characteristic, although whether it will include what the right hon. Gentleman recommends is a matter for the market, not for me.

Post Office

Mr. Janman: To ask the Secretary of State for Trade and Industry what plans he has to denationalise the Post Office and end its letter monopoly.

Mr. Leigh: The Government remain fully committed to the existence of a national letter service with an affordable, uniform tariff structure available to everyone, including those in rural areas. Girobank has been transferred successfully to the private sector, but no other decisions about structural changes have been taken.
The Post Office's letter monopoly is a privilege, not a right. Although we keep the options under review, we have no present plans to alter the scope of the monopoly. However, in the event of a cessation or serious disruption to the letter services we would consider suspending it.

Mr. Janman: My hon. Friend will be aware that since the denationalisation of telecommunications and the introduction of competition to that industry, the price of making a telephone call has gone down in real terms. Is my hon. Friend aware that there will be considerable support on Conservative Benches if, when the Government consider the future of the Post Office, they take close account of experience to date through the privatisation of British Telecom?

Mr. Leigh: Although one might be able to admire my hon. Friend's radical zeal in seeking to privatise the Post Office, I suspect that it would be unwise at this stage for me to replicate it from the Dispatch Box.

Mr. Loyden: Recognising the Government's attitude to intervention in these matters, may I ask the Government to take into account the need for a Post Office building programme? Is he aware that in many constituencies pensioners have to queue outside in the cold months of December, January and February to get their pensions and so on? Will he take up that matter with the chairman of the Post Office?

Mr. Leigh: I am not sure what point the hon. Gentleman was making. Was he saying that he wishes the Post Office to be privatised? I know not. However, 94 per cent. of post offices are already privately run. The point of our continuing review of the Post Office is to improve structures. We are not looking at ownership alone. The most important thing is to improve the service to the public, and that is what we have always been concerned about.

Economic Priorities

Mr. Day: To ask the Secretary of State for Trade and Industry what representations he has received from industry about the Government's economic priorities.

Mr. Lilley: I continue to receive representations from industry supporting the Government's determination to defeat inflation and to create a climate in which enterprise and wealth creation can flourish.

Mr. Day: Will my right hon. Friend confirm that yesterday's cut in corporation tax reflects the Government's determination to create the right climate in the market for business and, coupled with the Government's determination to drive down inflation still further, represents the real needs of British industry?

Mr. Lilley: I can, indeed, confirm those points. The reduction in corporation tax that was announced yesterday by my right hon. Friend the Chancellor will be of significant benefit to industry. We already have the most attractive environment for industry of any country in western Europe, which is why we attract more inward investment than any other country in western Europe. Tax is a major part of that and we now have the lowest rate of corporation tax of any country in the EEC.

Mr. Alex Carlile: Will the Secretary of State explain why one of the Government's economic priorities is to increase unemployment in the retail sector? Does he agree that the increase in value added tax that was announced yesterday is bound to have a significant effect on that sector and will significantly increase the recession in retailing?

Mr. Lilley: That is absolute nonsense. One of the policies of the hon. and learned Gentleman's party has always been to spread VAT more widely.

Mr. Ian Taylor: Does my right hon. Friend agree that it can be estimated that a 1 per cent. downward movement in inflation could save British businesses £5 billion? Was not the key announcement in yesterday's Budget, therefore, the expectation that inflation could be down to 4 per cent. by the last quarter of this year? Does my right hon. Friend further agree that that means that, on top of the welcome corporation tax reductions yesterday, the Government are doing the right thing for British industry?

Mr. Lilley: My hon. Friend highlights an important point. The reduction in inflation that was forecast in the Budget as being faster than was previously expected will be immensely welcome to British industry. It is the key to our economic future and to solving all other economic problems.

Mr. Gordon Brown: Is not it the case that the day after what the Chancellor called the Budget for business 7,000 redundancies and almost 100 company closures have already been announced? Does the right hon. Gentleman accept that growth is down by 2 per cent. this year, manufacturing output is down by 5 per cent. and investment is down by a massive 10 per cent., which is the worst record in western Europe and the worst in British history since 1932? Why is the interest rate cut that industry needs being delayed? Is not it the case that the Budget does too little, too late to prevent a spring and summer of redundancies, closures and bankruptcies, which is the direct responsibility of this Government's Ministers who have failed?

Mr. Lilley: The hon. Gentleman plays his normal recorded message to us, unchanged since before the Budget. British industry has responded to the Budget by welcoming it and all its major tax changes, which it considers essential for the future of this country. It is significant that the hon. Gentleman did not even mention them.

Mrs. Peacock: Has my right hon. Friend received any representations from business men, asking him to introduce an industrial policy similar to that recently outlined by the Labour Opposition?

Mr. Lilley: No, I have not. On the contrary, I have met many business men who have said that the last thing that they want is men in Whitehall telling them how to govern their companies. They welcome the fact that we are leaving more money in the hands of business so that they can take the decisions on investment, research and development, and training, which will strengthen their companies in the future.

ICI Fertiliser Business

Mr. Strang: To ask the Secretary of State for Trade and Industry whether, in view of the response of ICI to the Government's rejection of the proposed sale of its fertiliser business to Kemira Oy, the Government will review the priority that they give to maintaining employment in arriving at such decisions.

Mr. Redwood: My right hon. Friend will continue to regard competition as the essential matter when deciding his policy on references to the Monopolies and Mergers Commission. As the hon. Gentleman is aware, in its report on the Kemira case, the MMC went into the issue of employment, among several others. When considering that matter, my right hon. Friend looked at the whole report before coming to his conclusion.

Mr. Strang: Yes, but when hardly a day goes past without a major announcement of an industrial closure somewhere in the country, are the Government really prepared to shut down their productive capacity and destroy the hundreds of jobs that go with it for the sake of their dogma and opposition to state enterprise? Will the Minister confirm that ICI is going ahead with its plan to close down the plants and that in Edinburgh, for example, 140 direct jobs will be lost, not to mention the indirect jobs? What message has the Minister for the employees? Surely the Government must think again when the only alternative is the dole.

Mr. Redwood: If hon. Members read the report, they will see that the market share of the merged company was predicted to fall to 35 per cent. in a falling market. We are talking about a market with over-capacity and with considerable problems resulting from that. I find it difficult to reconcile that forecast of the market and the market share with the idea that all those jobs and all that plant could have been sustained had the merger gone ahead. My right hon. Friend the Secretary of State had to weigh many difficult matters in coming to his conclusion on the judgment of the MMC, but he decided that the MMC was right in its report, and that is where the matter rests.

Taxes and Public Expenditure

Mr. Franks: To ask the Secretary of State for Trade and Industry what representations he has received from industry about taxes and public expenditure.

Mr. Lilley: My right hon. Friend the Chancellor's Budget is a Budget for business. It has been widely welcomed as such by industry generally.

Mr. Franks: My right hon. Friend will be aware of the announcement early this morning of projected job losses of 3,000 to 5,000 in the shipyards of Barrow over the next four years. When formulating regional policy involving public expenditure, will my right hon. Friend recognise the inevitable consequences of the peace dividend in places such as Barrow-in-Furness? Will he recognise that, inevitably, his Department will have an increasing role to play in my constituency?

Mr. Lilley: I share my hon. Friend's concern about the job losses announced in his constituency. As he will have heard, my hon. Friend the Under-Secretary will be visiting his constituency shortly to assess the position. I believe that the measures taken in the Budget will make Britain in general and Barrow-in-Furness in particular more attractive to inward investment and for the development of new businesses. The measures to encourage small businesses will be particularly helpful and the reduction in corporation tax will attract industry to this country. I hope that that will bring benefits rapidly to my hon. Friend's constituents.

Mr. Gordon Brown: How does the Secretary of State think that it will help struggling businesses if millions of purchases in our high streets and shops are to be subject to an unwanted and unnecessary 2·5 per cent. poll tax supplement? Has he, as Secretary of State for Trade and Industry, made an assessment of the number of jobs that will be lost in textiles, electronics and high streets and shops as a result of the poll tax supplement? Or is it the case that to escape from the poll tax chaos that the Government have created, they are prepared to sacrifice the interests of anyone and everyone?

Mr. Lilley: The hon. Gentleman is apparently unaware that a transfer of tax from one source to another does not reduce the net purchasing power of consumers. He also has not let the House know how he would raise the taxation necessary for local government. Would he increase income tax instead of value added tax? He and his party will have to come clean about that before the end of Monday.

Sir Anthony Grant: Is my right hon. Friend aware that the small firms sector gives the warmest welcome to the way in which the Chancellor responded to its representations and that the very last thing that it wants is a return to the conditions that prevailed when the hon. Member for Bradford, South (Mr. Cryer) was Minister responsible for small firms? Will my right hon. Friend convey one other representation to the Chancellor from the small firms for an early reduction in interest rates?

Mr. Lilley: I welcome the points that my hon. Friend makes. He knows more about small firms than does the whole of the Labour Front Bench put together. He is right that the Budget has been well received by small firms. In particular, the rise in the threshold below which small firms do not have to pay VAT and the fact that my right hon. Friend the Chancellor got that through the European Commission are extremely welcome. I shall convey to my right hon. Friend my hon. Friend's point about interest rates.

Recession

Mr. Radice: To ask the Secretary of State for Trade and Industry when he will next meet representatives of the north-east regional CBI to discuss the recession in industry.

Mr. Leigh: Officials of my Department keep in touch with the north-east regional CBI on a wide range of business matters. The Secretary of State last met John Banham, director general of the CBI, on 5 February 1991 and he next expects to meet Sir Brian Corby, president of the CBI on 11 April 1991.

Mr. Radice: The Government have just been reminded by my hon. Friend the Member for Dunfermline, East (Mr. Brown) that, according to the Red Book, manufacturing output will fall by 5 per cent. and business investment will fall by almost 10 per cent. in 1991. In that connection, has the Minister noted the comments of the deputy director of the northern regional CBI, who said that there were no measures in the Budget that would help business confidence or investment? Is not that a scathing indictment of the Government's industrial and economic policy?

Mr. Leigh: The hon. Gentleman's comments are singularly inappropriate on the day after the Budget pumped three quarters of a billion pounds into industry. His comments are also inappropriate because in his district of Derwent, 5,000 jobs were created in the 1980s and because over the past 10 years no less than £3·5 billion of Government aid has been given to the north-east, which was carefully targeted to underpin a new spirit of enterprise. If the hon. Gentleman talked more often to business men in the north-east, as I did at the presentation of the north-east business of the year award, he would know that there is a sea change in attitudes. No fewer than 9,500 new businesses register for VAT every year in the north-east.

Mr. Holt: Will my hon. Friend take it from me that the words of Opposition Members are typical of the Labour party in the north-east? They for ever talk the region down, even though we have had more Government investment targeted into the area. We are not suffering from the recession that they talk about in such loud voices all the time. With companies such as ENRON bringing a £50 million investment for cheap electricity to the north-east, it is the Government who are bringing into that area the benefits of Conservative Government.

Mr. Leigh: I agree with my hon. Friend that it is extraordinary that 10 years ago the region was heavily reliant on three declining industries, but is now one of the most vibrant and successful regions in Britain. Why do not Opposition Members speak up for their constituencies and about what is happening in the north-east? I give a pledge to the House. I shall go to the constituency of the hon. Member for Durham, North (Mr. Radice) and talk about York Thermostar creating new jobs in his constituency. I shall talk about Eurosil——

Mr. Speaker: Order. The Minister should just answer the question that he has been asked.

Mr. Leigh: I shall also repeat what my hon. Friend the Member for Langbaurgh (Mr. Holt) said. We shall speak up for the north-east on Conservative Benches, even if Opposition Members do not do so.

Ms. Mowlam: Will the Minister now answer the question put by my hon. Friend the Member for Durham, North (Mr. Radice)? He gave not his view, but that of the CBI in the region. It is not Labour knocking the area. We fight hard in the north-east with the Tory Government. Will the Minister answer the question? What was there in the Budget to encourage investment? He should answer the CBI for a change.

Mr. Leigh: The hon. Lady asks what there was in the Budget to encourage investment. Did she not listen to the Budget? Does she not know that it put three quarters of a billion pounds into industry? It was one of the best Budgets for business that we have ever had. That is the truth, although she may not like it.

Companies (Foreign Capital)

Mr. Harry Greenway: To ask the Secretary of State for Trade and Industry if he will estimate the number of firms established in the United Kingdom with foreign capital during the past year; how many jobs have resulted; and if he will make a statement.

Mr. Leigh: According to the figures recorded by the Invest in Britain bureau, 1990 was a very successful year for inward investment. There were 340 inward investment projects, which are expected to create 27,000 jobs and safeguard a further 34,000. That demonstrates the continuing confidence in the United Kingdom as a sound and stable economy for inward investment.

Mr. Greenway: Will my hon. Friend confirm that the United Kingdom attracted £46 billion worth of inward investment in 1988–89, three times as much as France and six times as much as Germany? Does not that confirm what he has said? The climate in the United Kingdom—particularly in Ealing—is just what is needed for inward investors and any other type of investor.

Mr. Leigh: This is an interesting question: why was inward investment so successful last year that 61,000 jobs were created? Why do investors want to come here? Why are we the No. 1 location? It is because we are an entrepreneurial, hassle-free business environment with the lowest corporation tax in not only the EEC but the G7 countries.

Mr. Hoyle: How many of these companies intend to undertake research and development in this country? Or are they building purely assembly plants? [Interruption.] Will the Minister listen, for a change? Is the Minister quite happy that we are being treated like a banana republic?

Mr. Leigh: The hon. Gentleman will have to put aside his Luddite attitudes just once when it comes to inward investment. As is evident in the north-east in particular, inward investment has raised quality. It is interesting that, although such companies account for only 2 per cent. of establishments, they account for a staggering 18 per cent. of net output. They have improved business attitudes and they account for more capital investment than do other companies. They are 50 per cent. more productive than

British companies, although we have doubled productivity. Inward investment is good for British companies and for Britain.

Mr. Viggers: Does my hon. Friend agree that we have been outstandingly successful in winning investment from Japan? More than 1,000 Japanese companies have invested here—representing 40 per cent. of all the investment in the European Community. Does my hon. Friend agree that, to a considerable extent, that investment is predicated upon our membership of the Community, and that it is crucial, if we wish to win further inward investment, that we show complete commitment to achievement of the single European market?

Mr. Leigh: Yes.

Timeshare Advertising

Mr. Michael J. Martin: To ask the Secretary of State for Trade and Industry what further steps he is taking to prohibit misleading timeshare advertising.

Mr. Leigh: The Director General of Fair Trading made recommendations for changes to the Trade Descriptions Act 1968 to tighten the controls on statements about services and to bring timeshare award schemes within the Act's powers. I announced on 18 February that I had accepted those recommendations in principle. The detail of their implementation will be dealt with as part of the general review of the Trade Descriptions Act currently being undertaken.

Mr. Martin: I welcome the Minister's reply, but I urge him to hurry up and implement his proposals. Like many people in Glasgow, I received a personal letter. Mine said "Congratulations, Mr. Martin. You have won a holiday." In other cases it was a car or an item of jewellery. I was supposed to report to premises that were rented by the day. One newspaper reported that folk who turned up had to be turned away because these people had run out of jewellery. It is a scandal not only that people are allowed to operate in that way but that local authorities and national bodies are allowed to provide names and addresses for use in that manner. I hope that the practice will be stopped.

Mr. Leigh: I agree absolutely. [HON. MEMBERS: "What will the Minister do about it?"] We shall amend the Trade Descriptions Act——

Mr. Foulkes: And put the Bill through all its stages in a day? [Interruption.]

Mr. Speaker: Order. There seems to be an air of excitement today. I do not know the reason for it.

Mr. Leigh: We shall amend the Trade Descriptions Act to include award schemes. I should stress that a heavy responsibility rests on the public. I understand that my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) went to one of those award schemes and demanded his Fiesta. Surely the towering presence of my right hon. Friend would put any timeshare tout into full retreat.

Mr. Michael Brown: I am sure that the hon. Member for Glasgow, Springburn (Mr. Martin) will be delighted


with what my hon. Friend has said. However, may I draw my hon. Friend's attention to the Opposition's attitude in Standing Committee B this morning? [Interruption.]

Mr. Speaker: Order. The hon. Member knows that we are dealing with questions about Government policy.

Mr. Brown: Does my hon. Friend agree that, this morning, he could have accepted an amendment relating to timeshare——

Mr. Speaker: No. I am afraid that the hon. Member is out of order. What goes on in Standing Committee may not be discussed on the Floor of the House.

Mr. Ron Brown: Is the Minister aware that many people are conned by those advertisements and by literature that comes through their letter boxes suggesting that they have won special prizes? For example, I was told that I had won a special and wonderful Volkswagen limousine. As I was very interested, I went to Glasgow to pick up the vehicle. Instead, I received a watch. I protested. I said that I thought that in taking the parliamentary road to socialism we would travel in British cars, but that was not to be. Irrespective of whether I received a watch—incidentally, the watch went to charity—many of my constituents received correspondence similar to that which was sent to me. It is about time that something was done to stop companies abusing their position by kidding people on that they will receive prizes when the reality is that they will not.

Mr. Leigh: I feel sorry for the hon. Gentleman. I hope that he will not face too many disappointments in his forthcoming career. I understand that boats are offered in award schemes, and that might come in useful for the hon. Gentleman.

Telecommunications

Mr. Andrew Mitchell: To ask the Secretary of State for Trade and Industry what assessment he has made of the effects of Her Majesty's Government's telecommunications policies since 1987.

Mr. Lilley: Since 1987, the effect of the Government's telecommunications policies has been to boost competition, give customers greater choice, encourage innovation and cut prices. That has given us a dynamic telecommunications market which is the envy of the world. The recommendations in the recent White Paper will build on those successes.

Mr. Mitchell: Will my right hon. Friend mark the enormous contrast between the privatised BT of today, which is reducing the cost of call charges in real terms and has ensured that 96 per cent. of its coin boxes work, with the appalling state of affairs when the industry was nationalised? Then, it took an enormously long time to get any work done if, for example, one wanted a phone installed, charges were doubled in one year and a quarter of all coin boxes did not work. Will my hon. Friend condemn the decision of the Opposition, who have announced that they will renationalise BT after the next general election? Will he note that when those matters were discussed last Thursday during the debate on the Consolidated Fund Bill, only one Labour Member

attended to defend the Labour party's policy, presumably because Labour Members generally were embarrassed by what Opposition Front-Bench Members were saying?

Mr. Lilley: Indeed. I read the report of the debate to which my hon. Friend refers, including the interesting contribution that he made to it. It is significant that Opposition Members did not turn up for it. Perhaps even more significant was their loud applause today for the notion of nationalisation. That is very much on their agenda. I am happy to say that given the opposition of the 1·5 million shareholders and of the many, many more millions of customers, the Labour party will not get a chance to renationalise BT.

Mr. George Howarth: Will the Secretary of State reconsider his position on the development of the broad-band network? In particular, will he consider allowing British Telecom and Mercury to carry entertainment in such a way that would create 3,000 jobs in my constituency at the BICC factory and 30,000 jobs nationally? That is the way forward with telecommunications, not by way of the bland statements that the Secretary of State made today.

Mr. Lilley: The House will recall that BT applied for and was allowed franchises for cable television. It has chosen to withdraw from them. Other cable companies are, happily, going ahead with cable television and cabling. BT has introduced on trunk networks about 1·1 million km of optic fibre compared with only 13,000 km before privatisation.

Manufacturing Output

Mr. John Hughes: To ask the Secretary of State for Trade and Industry what plans he has to boost manufacturing output in the west midlands.

Mr. Redwood: We have just had a Budget which sets out many favourable things for business which will help those in the west midlands, as elsewhere. The November 1990 survey by the CBI showed that 80 per cent. of all respondents thought that the prospects for the west midlands were good or very good. So do the Government, and we shall give every sensible support that we can.

Mr. Hughes: Does the Minister accept that the Budget was an insult to the 107,000 unemployed men and women in the west midlands? Is he aware that this week production has plummeted once more and that since the spring of 1990 it has fallen in terms of value by £20 billion? That has cost the west midlands 306,000 jobs. Is not it time that the Government, and especially the Chancellor of the Exchequer in his Budget, took manufacturing industry seriously?

Mr. Redwood: The Government take manufacturing industry extremely seriously. There were many measures in the Budget that showed just that. Industry has welcomed the cut in corporation tax and the change in bad debt relief. It has welcomed many other measures in the Budget that will be of great assistance to business in terms of the tax structure and in the way in which taxes are computed. This is a most welcome Budget for business. As my hon. Friend the Under-Secretary has already said, a large amount of money is being given back to the business sector


through the Budget as proposed by my right hon. Friend the Chancellor and that will be welcome in the west midlands as elsewhere.

Mr. Gerald Howarth: Does not my hon. Friend agree that manufacturing industry in the west midlands has been transformed for the better by the Government over the past 12 years and is infinitely better placed to meet the present difficulties? Does he further agree that yesterday's Budget paves the way for further interest rate cuts, which will be even more beneficial to British industry, particularly the manufacturing industries in the west midlands which are so capital-intensive?

Mr. Redwood: I know that industry has widely welcomed the interest rate cuts so far and we wish to see more progress on inflation and on the development of the recovery that the Chancellor outlined in his Budget statement. It is also true that there has been a recent letter to a leading national newspaper, commenting on how refreshing it is to hear that my right hon. Friend the Secretary of State is such a strong supporter of manufacturing and understands its importance in the modern economy.
I endorse the views expressed in that national newspaper by the director general of the Engineering Council.

Dr. Moonie: Will the Minister tell us the forecast for fixed investment in manufacturing industry next year?

Mr. Redwood: A forecast has been published and has already been mentioned during this Question Time. Investment in manufacturing has declined in recent months, but we look forward to a recovery, as the Chancellor outlined in his Budget speech, as the economy improves.

GATT

Mr. Anthony Coombs: To ask the Secretary of State for Trade and Industry if he will make a statement on the reopening of GATT negotiations.

Mr. Sainsbury: We welcome the fact that a basis for the resumption of negotiations has now been established. We believe that a successful conclusion would provide a valuable non-inflationary stimulus to world trade and investment.

Mr. Coombs: Does my hon. Friend agree that one of the most important objectives of the current GATT round is to ensure that state subsidies made illegally to other foreign companies, which disadvantage our own companies, are eliminated? To that end, will he look again at the 1984 case of illegal state subsidies paid by the Belgian Government to Beaulieu, Belgium's largest carpet manufacturer, which have so far not been repaid? Does he understand that the House fully supports the Government's stance in urging through GATT that penalties be imposed on national Governments who do not ensure repayment of such illegal subsidies?

Mr. Sainsbury: My hon. Friend makes an important point because the strengthening of the rules and disciplines of GATT is one of the main purposes of the current Uruguay round. It is one reason why we believe an early, successful conclusion of the round to be important. I also agree that it is most unsatisfactory that the penalties

mentioned by my hon. Friend have still not been paid; we are looking to see how we can improve enforcement procedures in the Community.

Mr. Cryer: Will the Minister press for the extension of the multi-fibre arrangement beyond July this year, when it expires, if GATT does not prove satisfactory? As he knows, 14,000 jobs are directly involved in the textile industry in Bradford. It is a modern and up-to-date industry, in which the work force has co-operated enthusiastically in all the changes and modernisation. Those people deserve a Government who will preserve and develop jobs, but at the moment the Government seem to be letting the industry down—and that is the view of both trade unions and employers.

Mr. Sainsbury: I am glad to be able to agree with the hon. Gentleman about the efforts that the textile industry has made to invest and to modernise. It is as a result of those efforts that, unfortunately, there have been job losses in some areas. It is important to the industry that the GATT round creates better market access for its exporters and I am glad to say that the industry is a successful exporter.

Mr. Bill Walker: Will my hon. Friend bear in mind the importance of exports to Scotland, whose export record is even better than that of the Japanese, and in particular how whisky is affected in the negotiations? Will he also bear it in mind that malting barley and grain are essential ingredients in whisky and that without them we could not sell that marvellous product of which over 90 per cent. is exported from Scotland?

Mr. Sainsbury: I am happy to join my hon. Friend in paying tribute to the exporting success of Scottish industry and commerce. I very much recognise the importance to that success of market access for that excellent product, Scotch whisky. When I talk to my opposite numbers in other countries I seldom miss an opportunity of not only commending the product but urging better market access for it.

Research and Development

Dr. Bray: To ask the Secretary of State for Trade and Industry whether his Department is meeting its objective of encouraging industry to increase its funding of research and development.

Mr. Leigh: My Department is successful in encouraging industry to spend more on research and development. The total of industry-financed R and D has increased by almost one half since 1983 in real terms.

Dr. Bray: Is not it a matter of great concern that industrial research and development has fallen by 4·7 per cent. according to figures published last week by the Central Statistical Office? Since 1985, the only industry to have increased its research is the chemical industry, with a 41 per cent. increase in real terms. There have been catastrophic falls in R and D of 6 per cent. in electronics, 20 per cent. in aerospace, 39 per cent. in electrical engineering and 40 per cent. in mechanical engineering. Is not that proof positive of the disastrous failure of the Government's industrial policy?

Mr. Leigh: I hope that the hon. Gentleman will agree that the most valuable research and development in


industry is that planned for and funded by industry itself—that has grown by a half since 1983. Of the £7 billion spent on R and D in industry, no less than 73 per cent. comes from industry itself. However, it must be accepted that in some aspects of research and development, such as pre-competitive or collaborative research, particularly in small businesses, there is a role for the Government. My right hon. Friend the Secretary of State has taken a keen interest in such matters and introduced new schemes that are widely welcomed by industry. It will be good to end

Question Time by quoting the Confederation of British Industry—[Interruption.] Opposition Members are obviously not interested in the views of the CBI—I thought that they were.
John Banham wrote to my right hon. Friend on 19 February and said:
We were very pleased to hear the announcement of your new £48 million package of aid schemes for small firms … The addition of SPUR to the DTI portfolio and the greater emphasis you are now placing on technology consultancy … another area which we felt required strengthening and will, I am sure, be much welcomed by CBI Members.

Northern Ireland Electricity (Privatisation)

The Secretary of State for Northern Ireland (Mr. Peter Brooke): With permission, Mr. Speaker, I should like to make a statement about the Government's proposals for the privatisation of the electricity supply industry in Northern Ireland, which are being published today in a White Paper.
In framing my proposals, I have had in mind four main objectives: to introduce competition wherever possible with the aim of achieving the lowest possible prices for consumers; to regulate the industry in a way which will protect consumers' interests and maintain security and safety of supply without being unduly intrusive; to diversify further the Northern Ireland economy through the introduction of enterprising new participants into the power sector; and to encourage participation by employees of Northern Ireland Electricity, as well as electricity consumers in Northern Ireland, in the ownership of the industry.
Competition is the best guarantee of consumers' interests and I believe that there is considerable scope for it to be introduced into the electricity industry in Northern Ireland. Since Northern Ireland Electricity is, at present, a vertically integrated undertaking with an effective monopoly on all aspects of electricity supply in Northern Ireland, this will mean a change in structure. I have concluded that generation must be separated from transmission, distribution and supply and that generating capacity should not be in the hands of a single owner.
I am proposing, therefore, that the four existing power stations will be sold to not fewer than two independent companies. This arrangement should encourage some competition between the existing stations and so provide an incentive for increased efficiency; but the major benefits of competition in generation will come when new power stations are needed. Competition to provide and operate the new stations should create a downward pressure on construction costs and on the price at which power is offered to the suppliers.
The transmission and distribution networks are natural monopolies which it would not be economic to duplicate. They, together with the supply business and the retail shops—that is, the remainder of NIE apart from generation—will remain as a single undertaking, which will have an obligation to supply electricity to consumers. It will meet this obligation by contracting with existing generators for power supplies and, when additional generating capacity is needed to meet rising demand or because of retirement of old power stations, it will seek competitive bids from operators willing to build stations and provide the required amounts of power.
Northern Ireland Electricity's existing power stations will, therefore, be offered for sale to trade purchasers by competitive tender. The transmission, distribution and supply business will be sold by public flotation.
In reaching my decision on the structure of the privatised industry, I considered a number of other possibilities, but I believe that the structure that I have outlined best meets my objective of seeking to introduce the maximum possible competition while minimising the need for intrusive regulation.
In restructuring the industry, I also wish to facilitate the introduction of competition in the supply of electricity. The existing generators and new entrants to the industry will be able to apply for permission to supply consumers directly but there will be limits on the extent of such supply, at least for an initial period. This is because, given the present characteristics of the Northern Ireland system, the immediate introduction of full-scale supply competition could work against the interests of consumers. In developing my proposals, however, I intend to examine how best to ensure that there is a progressive increase in supply competition in Northern Ireland over time.
I intend to bring forward draft legislation in the near future to enable the electricity supply industry in Northern Ireland to be restructured in the manner that I have described and to provide for its privatisation. The legislation will establish new regulatory arrangements with the aim of encouraging competition, providing incentives for efficiency and ensuring that the resultant gains are fairly shared with consumers. There will be full consultation on the draft legislation and, in view of the importance of the provisions, I am extending the customary six-week period to 12 weeks.
In developing my proposals, I intend to work closely with the industry in order to ensure that the interests of consumers and Northern Ireland Electricity employees are protected. As was the case in Great Britain, employees' rights will be protected during the course of the industry's transfer to the private sector; existing pension arrangements will be safeguarded and the industry's existing negotiating and consultation machinery will remain as it is, although of course the unions and the new owners may wish to make changes in the future.
The White Paper makes reference to the need for new generating capacity in Northern Ireland. The provision of this new capacity will be a matter for the new owners, but the White Paper outlines a number of possibilities, including the acquisition of a supply of gas to the Province for power generation and the provision of an interconnector with Scotland.
The proposals that I have outlined, and which are set out in more detail in the White Paper, are designed further to strengthen the Northern Ireland economy and build on the achievements of the past, while creating a more competitive and efficient electricity industry to meet the future needs of consumers in the Province. They will also afford the people of Northern Ireland and the Northern Ireland Electricity work force the opportunity to invest in their own industry, which has such a vital role in relation to the Province's economy.

Mr. Kevin McNamara: I thank the Secretary of State for making his statement, but the White Paper is one Brooke initiative that we and the people of Northern Ireland could well do without.
It is significant that, in the proposals, the right hon. Gentleman did not seek the approval of the Northern Ireland parties which represent the people of Northern Ireland and which are all united with the Opposition against the general proposition and the hotch-potch of proposals which seems to be coming forward.
The right hon. Gentleman said recently that Britain had no selfish interest in Northern Ireland, but it has. It has a selfish interest in imposing outdated Thatcherite dogma upon the Province. There is only one consolation, and that


is the irony that the Under-Secretary of State, the hon. Member for Wiltshire, North (Mr. Needham), is having to explain this all away in Belfast this afternoon.
In Northern Ireland, the electricity system is equivalent to only one medium-sized power station in England, yet it is to have imposed upon it another English solution—at least two generating companies and a grid. That is despite all the advice that the Government have received that, if privatisation goes ahead, it should be through one single generating and distributing agency.
Will the right hon. Gentleman confirm that the generating capacity which will go out to tender would cost at least £500 million to replace, but it is unlikely that he will receive more than between £100 million and £150 million—a nice sweetener indeed to PowerGen, Hanson, National Power or whoever happens to get control? It also means that the control of generating capacity in Northern Ireland will pass out of the control of either the Government or the people of Northern Ireland. As for putting things out to sale by flotation of the grid, will the right hon. Gentleman confirm that that will be the only opportunity that the people of Northern Ireland will have to acquire any sort of share in what they already own—the Northern Ireland electricity undertaking?
Will the right hon. Gentleman also confirm that the recommendations in the White Paper are contrary to the advice given by the Northern Ireland electricity board, contrary to the advice given by consultants employed by that board, and also contrary to the initial advice given to the Government by their own consultants—until they were sent away to find new recommendations? Will he confirm that it is also contrary to the independent advice of Coopers and Lybrand Deloitte, which stated that, if privatisation should come about, it should be as one entity?
Can the right hon. Gentleman tell the House whether decisions on the gas pipeline spur, the interconnector with the south of Scotland or reconnection with the Republic will be entirely decisions to be taken by the new owners, or whether there will be any inducements given to the new people to develop those processes, either from the European Community or from the British Government?
Can the Secretary of State confirm that Sir Desmond Lorimer is to be the new chairman of Northern Ireland Electricity, in place of Dr. Schierbeek, whose work was much admired and who advised against splitting up NIE and therefore resigned recently?
Will the Secretary of State accept that the decision to separate the generating system from the distribution system flies in the face of all modern thoughts of conservation? Does he not realise that separate electricity generation and distribution will mean that each company will have a financial incentive to promote energy sales rather than energy savings, which is what we should be looking for?
What will happen to the overseas department? What institutional protection will be given to the consumer against increases in cost in a position which will be monopolistic? More particularly, and on a more immediate matter, what protection will there be for power workers who, once they are employed by privately owned companies, may come under increasing threat from paramilitary forces?
The right hon. Gentleman's proposals are irrelevant to the economic, social and industrial needs of Northern Ireland consumers. The Secretary of State has already announced the fattening up of the industry by increasing electricity prices last week to make it more attractive for privatisation. However, there is one consolation for the people of Northern Ireland—the time scale proposed by the Government. The incoming Labour Government will have the support of all the parties in Northern Ireland in abandoning these disastrous proposals and working together for an efficient energy policy that will benefit private and industrial consumers in Northern Ireland.

Mr. Brooke: The hon. Member for Kingston upon Hull, North (Mr. McNamara) embarked upon his remarks with a directness which made clear where his views lay. He referred to the congruity of the views of his party and the parties in Northern Ireland, in opposition to these proposals.
Since a central purpose of the proposals is to exercise a downward influence on prices, which will be beneficial to all consumers, the hon. Gentleman will have a little difficulty in explaining why he is acting in the interests of the general electorate.
In terms of the nature of the system, the purpose of our proposals is essentially competitive, and we shall see the benefits of competition that have resulted from previous privatisation exercises.
The hon. Gentleman asked me a question about the assets of Northern Ireland Electricity. I can confirm that those assets, at the time of the last balance sheet on 31 March last year, stood at about £400 million.
In terms of the flotation, the hon. Gentleman is correct to say that the opportunity to purchase shares will be in transmission, distribution and supply—that part of NIE that remains. However, the implications of the rhetoric that he deployed in terms of the percentage of NIE owned by individuals in Northern Ireland, in the fullest sense, also reflect his observations about the relationship of the generation of power in Northern Ireland to the generation of power in the whole country.
The hon. Gentleman mentioned the advice that the Government have received. We are at one with our advisers about our proposals, and I expect the board of NIE to support them as well. The interconnector and the gas pipeline are currently under negotiation. If it were possible to draw on the resources for future power generation, new owners would be able to consider doing SO.
I shall shortly be announcing the name of the successor to Dr. Schierbeek, to whose chairmanship I pay tribute.
The hon. Gentleman asked about conservation. The new arrangements will, of course, be subject to all the conservation rules to which the present arrangements are subject. He also asked about the overseas department. Such matters will flow from decisions made by the new management as and when transactions have occurred.
I think that, in expressing confidence that all the proposals that I have announced will be set aside by a Labour victory, the hon. Gentleman is counting his chickens a little early.

Mr. Roy Beggs: I think that the Secretary of State is the only person who believes that the proposals will bring competition to Northern Ireland. In


the absence of members of I he Democratic Unionist Party and the SDLP, I can confidently speak for them and say that all Northern Ireland parties will oppose this charade.
Will the Secretary of State tell the House whether the former chairman of NIE, Dr. Schierbeek, resigned because he too opposed the proposals? When we have had to put up with cartels operated through the banks for years, does he expect us to believe that a half-monopoly—two private-sector companies operating generation in Northern Ireland—will provide a better service than a public monopoly? Northern Ireland industry and Northern Ireland consumers have been crucified. Northern Ireland Electricity has declared both a £90 million profit and a huge hike for next year's prices. We shall be subjected to even worse by profit-motivated private companies in the future. This is a disaster.
I sincerely hope that the consultation period stretches over 12 weeks, because the Government will learn their lesson if they decide to go to the country within the next 12 weeks.

Mr. Brooke: The hon. Gentleman was more convincing in his statement about the possible opposition of Northern Ireland parties to the Government's proposals than in explaining why those proposals will not have the same competitive benefits as they have had elsewhere.
I have paid tribute to Dr. Schierbeek's chairmanship of NIE.
The hon. Gentleman called for the continuation of a public monopoly. He will be aware of the frequency with which he and his hon. Friends have called for what is effectively a degree of public subsidy for Northern Ireland electricity prices. We are determined to secure lower prices through the vehicle of competition. To say that consumers have been crucified reflects on the past pattern of behaviour rather than on our proposals. The hon. Gentleman also referred to profit. His observations show some clairvoyance, as the financial year has not yet come to an end.

Mr. James Kilfedder: The Secretary of State is aware, judging by what he has just said, that electricity prices in Northern Ireland for domestic consumers and for industry are far higher than the average in the rest of the United Kingdom. I would welcome any proposal that would reduce that heavy burden on people in Northern Ireland, especially retired people who live in all-electric homes.
Is the right hon. Gentleman aware that I have grave doubts about whether the measure will reduce prices? Will he assure us that, when electricity is privatised, it will not only bring prices down but keep them down? I fear that, once electricity is privatised, the shareholder will come first and the consumer a poor second.
Finally——

Mr. Speaker: Briefly, please.

Mr. Kilfedder: —in order to provide real competition, will he provide a gas pipeline between the mainland and Northern Ireland?

Mr. Brooke: I acknowledged in my answer to the hon. Member for Antrim, East (Mr. Beggs) the pattern of prices in the past. That is one reason why we are trying to gain the benefits of competition—in order to bring those prices down in the future. The hon. Gentleman said that he has

grave doubts, but it would be an unusual occurrence, in view of previous privatisations, if competition did not provide the beneficent influence that it has in other cases.
The hon. Gentleman asked about prices being kept down some way down the road. I am confident that that is more likely to happen some way down the road, when there are further opportunities for supplying competition. The hon. Gentleman fears that the profits would be garnered by the industry and not shared with the consumer, but the regulator would exercise just that balance. As I said earlier, we are engaged in investigating the pipeline.

Mr. Simon Hughes: Is the Secretary of State completely committed to what is clearly a matter of ideology rather than rationality, or is he saying that, if the consultative process results in wholesale opposition to his view from all parties and their representatives in Northern Ireland and from those informed about the industry, the Government will think again?
Will the right hon. Gentleman answer the specific question about the reason for the resignation of Dr. Schierbeek as chairman and the real effect on costs? If costs are 30 per cent. higher in Northern Ireland than in the rest of the United Kingdom—as is widely believed—is the Secretary of State saying that costs will come down by that amount? Given that the extra cost of getting rid of emissions is to be charged additionally to consumers over the next decade, presumably they will have to pay for that.

Mr. Brooke: If, in propounding the benefits of competition, I am regarded by the hon. Gentleman and his party as guilty of dogma, on behalf of my party, I happily plead guilty. The hon. Gentleman is correct that there will be a consultative period and there will be an opportunity for those who take a different view from the Government to demonstrate that the competitive results that I have forecast will not have the benign consequences that I mentioned.
Dr. Schierbeek had a contractual relationship with Northern Ireland Electricity which had come to a particular point. It is true that there will be a massive exercise in advance of carrying through the Government's proposals.
The hon. Gentleman referred to prices. I shall correspond with him on that, since he quoted a figure that I do not readily recognise.

Several Hon. Members: rose——

Mr. Speaker: Order. May I draw the House's attention to the fact that we have a busy day ahead of us and that many hon. Members wish to participate in the Budget debate? May we have brief questions? During the three-month period, we shall certainly be able to discuss this matter.

Mr. Julian Amery: Does my right hon. Friend agree that, whether the proposals are right or wrong, they will be seen in Northern Ireland as colonialism? If he wants to keep in touch with opinion in Northern Ireland, would not it be better to restore local government and get a better feel of what the community thinks?

Mr. Brooke: My right hon. Friend makes a delicious flank attack on me, and I know of his interests in the


matter. I do not think that I would accept his premise. Both the private and the industrial consumer in Northern Ireland should receive energy supplies at the lowest possible price, and that is the Government's principal motivation.

Mr. Merlyn Rees: What about possible ownership from outside the United Kingdom? If, for example, the Electricity Supply Board in Dublin sought to purchase the NIE, there would be nothing to prevent it.

Mr. Brooke: I understand the right hon. Gentleman's question. It would be inappropriate to prejudge the outcome of the tender competition to purchase power stations. [Interruption.] I will take this at dictation speed. Each bid will be examined on its merits, but I assure hon. Members that the public interest, in the widest sense, will be taken into account.

Mr. William Ross: The right hon. Gentleman seemed to suggest that he was dissatisfied with the efficiency of Northern Ireland Electricity, because of the cost of the electricity it produces. As the Government have run Northern Ireland Electricity for 10 or 11 years, will the right hon. Gentleman now resign because of the grave inefficiency that he has admitted? If he is so anxious to privatise Northern Ireland Electricity, this would be the supreme chance for him to introduce a Bill. Why does he not do so?

Mr. Brooke: The hon. Gentleman makes the seductive suggestion that I should resign over the provision of electricity. The Government's intention—this is quite deliberate—is to improve on the previous record by introducing competition into the system.

Mr. George Foulkes: Will the Secretary of State confirm that, if his misguided proposal goes ahead, there will be nothing to safeguard the continued use of high-quality Ayrshire coal, which is vital not only to the Ayrshire coalfield but to Ayr harbour?

Mr. Brooke: The hon. Gentleman has been pressing Ministers for some time on the subject of Ayrshire coal. Decisions on the future design of power generation in the Province will be in the hands of the operators, but I should be surprised if Ayrshire coal did not prove competitive in the exercise. I am greatly distressed that the hon. Gentleman thinks that Ayrshire coal needs a crutch or prop to sustain it.

Mr. John D. Taylor: Does the Secretary of State recognise that the Ulster Unionist party created the state industry of Northern Ireland Electricity and is proud of NIE's service to Northern Ireland? Does he accept that all the Northern Ireland parties in the House are against his proposal?
Will the right hon. Gentleman explain why he will not allow the House to debate the proposals in a normal parliamentary manner? Why does he intend to force them through the House by means of an Order in Council, rather than having a proper parliamentary debate on a Bill on a process that vitally affects all sections of Northern

Ireland? Why does the Secretary of State oppose cross-community relations in Northern Ireland when the whole community is united on this matter?
Why is this not a normal privatisation? Why will shares not be floated to the public? Why is the sale restricted to tenders from the limited firms in a position to tender for such stations? Is it true that one of the firms already created is led by the president of the new Northern Ireland Conservative party?
Will the Secretary of State reconsider the idea of privatising power stations that belong to Northern Ireland by restricting the sale to a few selected companies, and instead—if privatisation is to be forced upon us—give us the same type of privatisation as has happened elsewhere in the United Kingdom?

Mr. Brooke: The right hon. Gentleman is of course quite right to take the credit for the previous actions of the Ulster Unionist party in creating the industry. I find somewhat at variance the periodic criticisms by members of his party of the price charged for electricity in the Province and the suggestion that it would be better if that price was otherwise. That seems to me to be sporadic pride.
The right hon. Member for Strangford (Mr. Taylor) asked about the Order in Council; I must apologise to the hon. Member for Londonderry, East (Mr. Ross) because I did not answer his question about that. All hon. Members will be aware that the privatisation of the industry in Northern Ireland is essentially a transferred matter under the Northern Ireland Constitution Act 1973, and such measures are generally dealt with by an Order in Council.
The right hon. Gentleman also asked why we were not following a normal privatisation process. I must stress that the generators will be sold by tender to not fewer than two independent companies. The balance of NIE will be sold by a flotation to the wider public. The restructuring that gives rise to the different treatment is taking place to introduce the competition to which I have consistently referred in my replies today.

Mr. Dick Douglas: Will the Secretary of State elaborate on the significance of the interconnector? What are the prospects of public finance for the interconnector, in view of its importance for electricity generation in Scotland and the Scottish coal industry? Is it not a trifle absurd to go forward with what amounts to half a prospectus without a proper evaluation of the cost benefit of such a link between Northern Ireland and the rest of Britain?

Mr. Brooke: I have consistently said in answers on this statement that the idea of an interconnector with the Scottish industry is now being pursued energetically, discussed and negotiated. While those negotiations obviously need to be commercially sensible, I sincerely hope that future suppliers of power generation in the Province will have the widest possible variety of options available to them, and that also applies to the gas pipeline.

Mr. Harry Barnes: Why has there just been an 8·5 per cent. increase in electricity prices in Northern Ireland? Were not prices raised, to the detriment of consumers there, to fatten up the electricity companies for the privatisation that has just been announced? Why can we not have normal procedures for


this legislation so that it can be amended in the House? The recent emergency legislation for Northern Ireland was not made by Order in Council. We do not have to have Orders in Council for this kind of legislation.

Mr. Brooke: The implication of the hon. Gentleman's question related to the level of profits that NIE declared last year. However, in terms of current costs, those profits amounted to £4 million. As it is known that further power generation will be necessary in the Province in the near future, the reconstruction of the industry is difficult to contemplate if the profits are only £4 million per year.

Mr. D. N. Campbell-Savours: Can we get it quite clear? Is it true that the Northern Ireland electricity board, the consultants to the board, the first opinion of the Government's own advisers, Coopers and Lybrand Deloitte, Dr. Desmond Lorimer, the next chairman, and Dr. Schierbeek, the former chairman, all opposed privatisation in the form outlined by the Secretary of State today? Why do the Government believe that those people are wrong and the Government are right? This matter will inevitably come before the Public Accounts Committee. Get it right.

Mr. Brooke: The answer lo the hon. Gentleman's rather long list of questions is no. In terms of the proposition that I have put forward, I said that there was no conflict between the Government and their advisers. As I said, I am confident that the hoard of Northern Ireland Electricity will support what we propose.

Mr. Bob Cryer: Why can we not have legislation when the Minister knows that the powers of delegated legislation are scrutinised wholly inadequately? To undertake such a major policy by anything other than primary legislation is an abuse of the House.
Can the Secretary of State assure us that the chairman of the Northern Ireland Conservative party will not be involved in any financial dealings whatsoever with the privatisation, that no contributor to Conservative party funds will be allowed to tender, and that no contributor to Conservative party funds will be allowed to promote the scheme, be involved in merchant bank funding for the scheme, or be involved in any other way? If the Secretary of State cannot give that assurance, it will appear to people outside to be a clear case of political corruption.

Mr. Brooke: The hon. Gentleman is a respected authority on our legislative procedures. There will be an opportunity for full consultation on the Government's proposals for the privatisation of NIE, which may also be debated in the Northern Ireland Committee, if hon.

Members request it, before the order is laid before Parliament. I hope that such all opportunity will be available.
On the questions that several hon. Members have asked about the Conservative party in Northern Ireland, it has been my experience that, on a series of issues, the Conservative party in Northern Ireland has regularly been in disagreement with the Secretary of State, and, perhaps with the single exception this afternoon, more frequently than any other politicians in Northern Ireland. I shall certainly pay attention to its views and to its position, but, in the past, its complaint has been that I have been paying insufficient attention to it.

Mr. Dennis Skinner: rose——

Mr. John D. Taylor: On a point of order, Mr. Speaker.

Mr. Speaker: No, I will take Mr. Skinner's question first.

Mr. Skinner: Does not the Secretary of State realise that one of the reasons why hon. Members who represent Northern Ireland constituencies are against the measure is that they can see what has happened to the privatisation of electricity in Great Britain? They see prices going through the roof, and they do not want any more of it. As for the Secretary of State's remarks about subsidies not being applicable to Northern Ireland, perhaps hon. Members from Northern Ireland will say that what is good enough for Wandsworth's subsidies is good enough for them.

Mr. Brooke: I think that this is the first time that Wandsworth has been injected into one of our Northern Ireland debates, but they do range widely. The Government's preoccupation is with getting prices down in Northern Ireland and making them competitive not only with Great Britain but with the rest of Europe, because, in the Europe after 1992, it will be peculiarly important that Northern Ireland should be able to compete on a level playing field.

Mr. John D. Taylor: On a point of order, Mr. Speaker. When hon. Members on these Benches asked for a Bill rather than an Order in Council so that we could have a proper debate on the measure and the right to table amendments, the Secretary of State kindly responded by saying that a debate could take place in the Northern Ireland Committee if we so requested it. Is that not somewhat misleading, in that, even if the order went before the Committee, we would not be allowed to table amendments? That would not be in accordance with the normal parliamentary rights that hon. Members should have.

Mr. Speaker: I have no responsibility for Select Committees, but I understand that that is the case.

Lewis Group

Mr. Kenneth Hind: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the loss of 1,500 jobs in the Lewis Group of retail stores".
The Lewis group recently went into receivership and Grant Thornton, the accountants, was appointed the receivers. Grant Thornton is set to make a deal of sale of five of the stores with Owen Owen, a retail stores group, which will result in the loss of 1,500 jobs.
The matter is urgent for the simple reason that that deal will be made on Friday and any opportunity for further bids will be prevented. The receivers, Grant Thornton, are giving inadequate consideration to the offer of a management buy-out which is backed by substantial funds from Shire Trust and other venture capital funds to purchase all 10 of the remaining stores in the group and the warehouse and head office, thus preserving the 1,500 jobs. It is likely that, if Owen Owen is allowed to purchase the stores, the result will be job losses in Liverpool among my own constituents, and at the remaining stores in Preston, Blackpool, Leicester, Thurrock and Glasgow, as it is unlikely that they will attract buyers.
The purchaser, Owen Owen, backed by Capital and Counties Plc, wants only five stores, three of which are in Liverpool, Manchester and Leeds. The company already owns a store in Liverpool and, as a consequence, there is a great fear in the north-west that the Lewis's store could be sold, with great job losses. There would be no need for the Liverpool head office and warehouses to be retained, but they would be required by the management buy-out team, which would protect a large proportion of the jobs.
The receiver was appointed by the National Westminster and Lloyds banks, both of which, it is calculated, will recover their indebtedness from the management buy-out deal. Therefore, there is absolutely no reason why all those who are interested should not be given an adequate opportunity to bid for the stores.
We in the north-west have suffered a recession in the past—in the early 80s—when we fought to retain jobs. It is vital that we continue to fight. It is under those circumstances that I seek leave to move the Adjournment of the House.

Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely
the break-up of the Lewis Group and the loss of 1,500 jobs
I have listened with concern to what the hon. Gentleman has said. He knows that I have to decide whether to give that matter precedence over the business set down for today or for tomorrow. In this case, I regret that the matter that he has raised does not meet the requirements of the Standing Order and I therefore cannot submit his application to the House.

Reserve Free Travel Scheme (London)

Mr. Harry Cohen: I beg to move,
That leave be given to bring in a Bill to amend the London Regional Transport Act 1984 and to make other provision in respect of the reserve free travel scheme for certain categories of London residents.
When you announced your retirement the other week, Mr. Speaker, many hon. Members paid tribute to you. The difference between us London Labour Members and a lot of the other Members who have paid tribute to you is that we would like to give you a parting gift, and my parting gift to you is this Bill, which will offer you a free travel pass in London for the rest of what I hope will be your very long life.
The VAT rise in the Budget will hurt a lot of pensioners' pockets—but perhaps not your own, Mr. Speaker. At the very least, Parliament should assure those pensioners that they will continue to have concessionary travel arrangements. The purpose of my Bill is to obtain better travel pass arrangements for pensioners, to improve them and to guarantee for years to come that London pensioners will have a free travel pass.
I should like to give the House a brief history of the scheme. In April 1971, the London Boroughs Association began to co-ordinate a concessionary fares scheme for the elderly to allow them to travel at child rates, but only on buses. Some individual boroughs had local discretion over the criterion for eligibility. Subsequently, in September 1973, the Greater London council took over those arrangements and widened the concessionary fares scheme to blind and disabled people, and offered free travel to all people of pensionable age. Gradually, the scheme was extended further, to include free travel on London Country buses, half fare on Green line buses and half fare on British Rail from 1983. The scheme also operated for longer hours. It was extended to the underground in 1976 at a 20p flat fare, which became free in June 1981.
Unfortunately, the GLC was abolished by the Government. Only after immense lobbying by London pensioners and a threatened rebellion by Conservative Back-Bench Members during the passage of the London Regional Transport Act 1984 was the free fare scheme saved and the statutory reserve scheme introduced.
The problem is that the reserve scheme is not as good as the scheme which is in operation. It would take only one London local authority to back out—several Tory councils have threatened to do that in the past—for the current arrangements to collapse. In addition, local authorities have found that the cost of the scheme, now running at £110 million, has been rising beyond their control, because LRT has set fare rises well above inflation and has charged councils the equivalent for pensioners' travel. That problem is building up for local authorities.
If the current scheme collapses and we go over to the reserve scheme, there will be a worse service for London pensioners. For example, the reserve scheme does not provide any travel concessions on British Rail. It would start at 9.30 am on weekdays instead of 9 am. The period for which free travel is offered under the reserve scheme could be varied by London Transport under section 51(7) of the Act. London Transport might well vary it, for example, by getting rid of the free travel aspect.
Paragraph 51 of "A Bus Strategy for London", brought out by London Transport, says:


One option for change from the existing reserve scheme would be to specify the scheme in legislation only for the first year of operation. After that there would still be a reserve scheme, but it could be deemed to be whatever scheme was in force the previous year, rather than automatically reverting to a free scheme, as now.
The implication is clear: the free scheme could go in those circumstances.
In addition, the element of local discretion for boroughs under the National Assistance Act 1948 would go, and that could have repercussions for some, including the mentally ill. The reserve scheme would be more expensive. For example, airbus travel would have to be included and charged to London authorities. London Transport would decide the charges and impose them on the boroughs.
My Bill seeks to ensure that if the scheme operated by the London boroughs fails, the reserve scheme, which is guaranteed in law, will give London pensioners the same concessions as they get now, which include BR travel and the earlier starting time to which I have referred.
I am also trying to improve the existing scheme by offering free travel instead of half fare on British Rail and on Green line buses within London. The whole scheme needs to be examined to counter the threat to pensioners' passes because of the Government's deregulation plans.
To summarise the aims of the Bill, the service to pensioners should be improved, the reserve scheme should be as good as the current scheme which is operated voluntarily by local authorities, the Secretary of State's power should be limited only to being able to improve the scheme for users and to help allay some of the costs, and LRT's responsibility for setting charges to local authorities should be limited to the equivalent of fare rises or the inflation rate, whichever is the lower. On top of that, the contribution which the local authorities have to pay for the pass should riot be counted in any poll tax capping or other capping arrangements introduced in future.
The Bill deals specifically with London, but I am not concerned only about London. I am not parochial about these matters. I want free travel arrangements for

pensioners to be extended to all local authority areas. There should be a statutory reserve scheme in those areas in case Tory local authorities start taking away the concessions which are already provided in those areas.
My Bill has the support of pensioners and travel organisations. For example, Age Concern said:
an acceptable minimum level of service would be the currently voluntary scheme.
A representative of the London regional passengers committee is quoted as saying that a main concern was to ensure the continuation of concessions already achieved.
The pensioners' pass is safe for this year, because the general election is looming, but after that it will be at considerable risk. It comes up for review in December this year. As I said at the beginning of my speech, all Londoners want the problems to be sorted out early. That is what my Bill seeks to do. It would guarantee pensioners a free travel pass well into the 21st century, so that London pensioners—including you, Mr. Speaker—can enjoy it well into their dotage.

Question put and agreed to.

Mr. Speaker: Who will prepare and bring in this excellent Bill?

Mr. Cohen: rose—

Hon. Members: Mr. Speaker.

Mr. Cohen: Yes, perhaps Mr. Speaker.
Bill ordered to be brought in by Mr. Harry Cohen,
Ms. Diane Abbott, Mr. Tony Banks, Mr. Jeremy Corbyn, Mr. Tom Cox, Mr. John Fraser, Ms. Mildred Gordon, Miss Kate Hoey, Mr. Ron Leighton. Mr. Ken Livingstone, Mr. Peter Shore and Mr. Nigel Spearing.

RESERVE FREE TRAVEL SCHEME (LONDON)

Mr. Cohen accordingly presented a Bill to amend the London Regional Transport Act 1984 and to make other provision in respect of the reserve free travel scheme for certain categories of London residents: And the same was read the First time; and ordered to be read a Second time upon Friday 19 April and to be printed. [Bill 116.]

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [ 19 March].

Orders of the Day — AMENDMENT OF THE LAW

Motion made, and Question proposed,

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting any supply;
(b) for refunding any amount of tax, otherwise than by virtue of goods or services supplied to one person being treated for the purposes of section 14(3) of the Value Added Tax Act 1983 as supplied to another person;
(c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or
(d) for relief other than relief applying to goods of whatever description or services of whatever description.—[ Mr. Norman Lamont.]

Question again proposed.

Orders of the Day — Budget Resolutions and Economic Situation

[Relevant document: European Community document No. 4433/91 on the Annual Economic Report 1990–91.]

Mr. John Smith: A Budget is not just about revenues and fiscal policy. It provides an opportunity for the Chancellor of the Exchequer to make an important statement about the management of the economy and to assess the prospects for the future. It has been noticeable that this Government have used forecasts about our economy ruthlessly and irresponsibly to conceal the real trends in economic performance by always painting a reassuring picture about future prospects. However depressing is the reality of today, happy days are promised for just round the corner. Hence, in this Budget statement we are told that recovery from deep recession is imminent and, indeed, is assured to happen as soon as next year.
The Government's technique has become familiar because this is not the first assurance that we have had about prospective economic improvement. After all, we were told not so long ago that, as part of the miraculous economic achievement, the scourge of inflation had been eradicated. In his 1988 Budget statement, the right hon. Member for Blaby (Mr. Lawson), whom the Chancellor apparently regards as his mentor, told us:
It is a testimony to the soundness of our policies that the present strong and sustained upswing, unlike almost all its predecessors, has not led to any resurgence of inflation."—[Official Report, 15 March 1988; Vol. 129, c. 994.]
The right hon. Gentleman was not alone. The then Chief Secretary—the present Prime Minister—told us in the autumn statement debate of that year:
Inflation is low and will remain so".—[Official Report, 14 January 1988; Vol. 125, c. 549.]
We know now, of course, that they were both completely wrong. Inflation doubled, rising to more than 10 per cent.

last year. So much for Conservative assurances about the prospects for inflation. Even as it rose relentlessly, it was described as a "temporary blip".
Similarly, we had expansive assurances that recession would not occur, that any pause in the economy would be—to quote the present Chancellor—"shallow and short-lived". Of course, good news is always predicted. Any disturbing tendency is minimised, or concealed by a fresh declaration of confidence, hard on the heels of the last disappointment. A classic of this genre appeared in last year's Budget statement, when the then Chancellor told us that, whatever had been the problems of 1990, we could be confident about good times in 1991. He said:
Growth should return in 1991 towards its sustainable rate of around 2¾ per cent. I am confident that the period of low growth will be short lived."—[Official Report, 20 March 1990, Vol. 169, c. 1011.]
That statement is characteristic of the present Prime Minister. In the Red Book he published a growth figure of 1·5 per cent., but he could not restrain himself from hinting that it might be 2·75 per cent. It would take a Chicago lawyer to get at the real meaning of this remark:
Growth should return in 1991 towards its sustainable rate of 2¾ per cent.
What on earth does that mean? However, it is typical of the Prime Minister that he should publish one figure in the Red Book and, in his statement to the House of Commons, hint that the situation might be much better. But it does not really matter what he intended to say. He was right about at least one thing: growth was short-lived. There was none at all. Far from growing at anything like 2 per cent., the economy slid into recession.
But exactly the same rose-tinted forecast was made by the then Chief Secretary, who is now the Chancellor. Concluding his speech in last year's Budget debate, he made this ringing declaration:
Pain there may be, but gain there will also be. By this time next year, the prospects will be distinctly brighter. [Official Report, 21 March 1990; Vol. 169, c. 1142.]
Here we are, one year later—[AN HON. MEMBER: "The prospects have been brighter for him."] They have been a little bit brighter for him. There were some ups and downs on the way, and I gather that there is a continuing argument between the right hon. Gentleman and his predecessor as Prime Minister as to what precisely was his role in these events. However, perhaps I should not inquire too closely into matters of private grief—[Interruption.] The hon. Gentleman may get more attention for that sedentary intervention than he planned. I can tell him that the right hon. Member for Finchley (Mrs. Thatcher) keeps a careful eye on all that is happening. I think that the hon. Gentleman is trying to take some of the heat off the Chancellor of the Exchequer. Come to think of it, he looks a bit like a lightning conductor.
As one reads earlier debates, one finds that some feelings that have obviously been kept under tight control for a very long time are beginning to peep out. [Interruption.] Someone says that Conservative Members are glad that the right hon. Member for Finchley has gone. Unfortunately, he did not get as good a reward as did the right hon. Member for Kingston upon Thames (Mr. Lamont), who, as Chancellor of the Exchequer, now holds one of the senior positions in the Government. I must not be diverted by the seated interjections of members of the Government Front Bench, however entertaining they may be.
We must examine the brighter prospects that we are enjoying this year compared with last year's Budget forecasts. In last year's Red Book, it was predicted that in the first half of 1991 there would be growth of 1·5 per cent. Yesterday, the Chancellor of the Exchequer told us that it would fall by 2 per cent. We were told last year in the Red Book that manufacturing output in 1991 would increase by 0·75 per cent. Yesterday, that estimate was revised to minus 5 per cent. Last year, fixed investment in 1991 was expected to decline slightly, by 0·75 per cent. Yesterday, it was reduced massively to the almost unprecedented level of nearly 10 per cent.—9·75 per cent. to be precise.
Do the new and grim forecasts for 1991 reveal the distinctly brighter prospects that were promised 12 months ago by the then Chief Secretary, who is now the Chancellor of the Exchequer? Since that Budget, unemployment has increased by almost 400,000. Is that another feature of the brighter prospects that were promised last year for the year that lay ahead?
We see from the repeated contradictions between promise and performance how thin is the credibility to be attached to any forecast about anything in the economy that comes from Ministers of this Government. Let us keep at the forefront of our minds when considering their blithe asssertions the fact that, after heading sharply downwards, the economy will suddenly recover to growth of 2 per cent. in lime for the last available date for the next general election. What a happy statistical coincidence. What a wonderful world we live in when we can create on the basis of bogus predictions and misdeclarations about the economy.
It was surely significant that the Chancellor of the Exchequer drew our attention to the severe penalties that were attached last year by the Government to incorrect declarations in the value added tax system. The present Chancellor of the Exchequer reminded us yesterday that especially severe penalties had been introduced for those who persistently made inaccurate financial returns. The right hon. Gentleman referred specifically to the serious misdeclaration penalty which was introduced in April 1990. His experience since then appears to have given him a special sympathy for the miscreants to whom the penalty was directed. He told us that there had been widespread protest that the penalty was too severe. I give the Chancellor of the Exchequer credit for realising that it was wholly inappropriate to impose such a penalty on those whose misdeclarations were minor matters compared with the gross misdeclarations about the economy that Ministers have made year after year.
Whatever the Government try to do, the facts eventually catch up with them. Yesterday, the Chancellor of the Exchequer was noticeably reticent about some key economic indicators. Not a word did he say to the House about the estimate for fixed investment for 1991. The right hon. Gentleman's predecessor told us last year that fixed investment would decline by slightly less than 1 per cent. The forecast that the present Chancellor of the Exchequer has been obliged to print in the Red Book reveals, as I have already said, that the forecast for 1991 is a precipitate fall of almost 10 per cent. Why, we wonder, was that omitted from the Chancellor's Budget presentation yesterday and, indeed, from his television broadcast last night? Come to that, the right hon. Gentleman made no reference to the projected fall in manufacturing output. It was forecast a year ago that it would increase by almost 1 per cent., yet it is now expected to drop by as much as 5 per cent.
These are, for the Government, embarrassing indicators of what is happening in the real economy and of the depth and seriousness of the economic recession that afflicts our nation. At least it seems to be accepted that there is a recession. I have no doubt that that is only because it can no longer plausibly be denied—not that the Government did not try to do that as well. In December 1989, the present Prime Minister scoffed at the notion that there would be a recession at all. He said in a speech to the Association of British Chambers of Commerce:
I do not believe myself that a recession is either likely or necessary.
Not to be outdone, the present Chancellor of the Exchequer, after being cornered by the Select Committee on Treasury and Civil Service, and having to accept that there was indeed a recession, told us that it would be
shallow and short-lived".
Let us ponder for a moment the now admitted fact that investment will fall by 10 per cent.—as far as I can discover, an unprecedentedly bad prediction. Investment is the seed corn of economic progress, yet here in Conservative Britain it is falling through the floor. Ominously for us, that is not happening elsewhere. The latest figures of the Organisation for Economic Co-operation and Development show that all the other members of the Group of Seven are maintaining positive and superior levels of growth in investment.
Investment is vital for economic recovery, particularly in the context of the single market after 1992. It does not seem to worry the Government that in other European countries 1991 is a year of preparation and investment. In Tory Britain it is a year of cuts and decline. That is why we in the Labour party called for a Budget for investment and for recovery. That is why we proposed lower interest rates and a package of investment incentives for manufacturing industry. The Government felt obliged to make reductions in corporation tax—no doubt because of the parlous condition of so many smaller companies as a result of the recession and the years of high interest rates. We should have preferred the fiscal relaxation to have been targeted on the stimulation of investment in the manufacturing sector which, after all, is the crucial wealth creator and the most internationally tradeable part of the economy.
We also proposed a major investment in training, another area of policy which, like manufacturing, seems not to concern the Chancellor of the Exchequer very much. We proposed that the foolish cuts in the training budget of £245 million should be reversed. How can the Government justify those cuts when we have skill shortages in the midst of sharply rising unemployment and when we are now in the most absurd of all situations, putting trainers on to the dole?
We also recognised the human problem as well as the economic waste of rising unemployment, up by 85,000 last month alone or more than 4,000 lost jobs for every working day of the month. We proposed to tackle that by a temporary employment scheme to provide both work opportunity and training for the growing number of our citizens without work. Our proposals in this regard would have cost £340 million, and we would have invested £300 million in a new skills fund to provide much-needed extra resources for the training and enterprise councils and non-statutory training organisations.
The only acknowledgement of any training need in this Budget was the tax allowance for individual training costs at an estimated cost to the Treasury during 1992–93 of £20


million. Such a sum shows how totally inadequate is the Government's appreciation of the scale of the training disaster that our country has suffered in the Conservative years.

Mr. Nigel Forman: I have been trying to follow closely the argument of the right hon. and learned Member for Monklands, East (Mr. Smith). Is it implicit in what he has just said that the previous undertaking given, I think, by him and the shadow Chief Secretary, the hon. Member for Derby, South (Mrs. Beckett)—that the only areas of public expenditure which would be expanded under a future Labour Government were child benefit and pensions—will be extended to cover increased expenditure on these other worthy purposes to do with training? If so, what items of public expenditure does he intend to reduce to make room for those increases?

Mr. Smith: The hon. Member for Carshalton and Wallington (Mr. Forman) should have read some of the proposals that we published last week. First, he misrepresents what my hon. Friend the Member for Derby, South (Mrs. Beckett) said. We indicated the priority that we attach to certain items of expenditure, but we did not exclude the possibility that we would enter into proposals for other areas of expenditure.
That was why I drew the hon. Gentleman's attention—I could not have done so more specifically—to the precise sums in our proposal. I hope that he does not think that I did that just for fun. I did so to show the House that we were entering into a commitment to achieve precisely that end. He should consider why on earth the Government whom he supports do not enter into a similar commitment to tackle our training problems. Surely a man of his perception, knowledge and experience of such matters knows that we have a training disaster in this country. What does he do about it—does he merely wring his hands and say that there is nothing that he can do about it?

Mr. Forman: The answer to the nation's training needs is to be found in the TECs, which are going ahead very satisfactorily—[Interruption]—and the sensible tax relief proposed for individual training.

Mr. Smith: I do not wish to be disrespectful to the hon. Gentleman, who tries to make a helpful contribution to our debates, but he should have listened to what I was saying. I drew attention to the Budget proposals for tax relief for people on individual training programmes, but I said that £20 million—not this year, but the year after next—is hardly an adequate response to the scale of Britain's training problems.
The hon. Gentleman referred to TECs. Does not he know that almost all the TEC chairmen protest loudly that they have been given responsibilities by the Government without being given the resources to carry them out, and have recruited various people from the private sector to contribute to the TECs, who discover on arrival that there is no money for them to carry forward the programme? My constituency is suffering from that very problem. The Government amalgamated the Scottish Development Agency and the Training Agency into a new organisation, Scottish Enterprise, and set up many local enterprise companies. The one that affects my constituency,

Lanarkshire Development Agency, has had to cut the training programme that had already been promised. Its first job is to deliver the bad news that the Secretary of State for Employment lost the argument with the Chancellor on the previous autumn statement figures. That is why, unhappily, money is being cut from training. I hope that, when he reflects on it, the hon. Gentleman will see that there is a great deal of wisdom in what we are saying.
There are some proposals in the Budget——

The Secretary of State for Social Security (Mr. Tony Newton): I wonder whether, before the right hon. and learned Gentleman hastily moves on from Labour's shadow Budget—[Interruption.] He would have been wise to move hastily because he will know that I have been asking the hon. Member for Oldham, West (Mr. Meacher) to explain the major balancing item in the shadow Budget, an alleged saving of £619 million by withdrawing the personal pensions incentive. That could be done only by taking back money to which people already have a legal entitlement and wrecking 4 million personal pensions. Is that the Opposition's policy?

Mr. Smith: The right hon. Gentleman knows perfectly well that that was one of the changes that we proposed. Our proposals clearly suggested that the bribe for people to enter personal pension schemes should not be continued. The precise figure—which I understand the right hon. Gentleman also contests—was supplied by his Department in a parliamentary answer. On the whole, we should be entitled to rely on that. That is the answer.

Mr. Newton: rose——

Mr. Smith: The right hon. Gentleman might ask me whether I am prepared to give way. I have not assented to give way and it is slightly arrogant to wander up to the Dispatch Box without asking the speaker if he will give way.

Mr. Newton: The £619 million included in the shadow Budget is money to which people already have a legal entitlement and most of which has probably been paid in respect of contributions that they have already made. Is that or is that not to be withdrawn?

Mr. Smith: The right hon. Gentleman should know perfectly well that, since that proposal was introduced by the present Government, the Labour party has said that it would be one of our ambitions to withdraw it. We are merely proposing once again that that bribe should not be continued.
The right hon. Gentleman's other shot at this subject was to try to say that we had dropped our commitment to uprate old-age pensions according to prices or earnings, whichever was the higher. We do not have to repeat that commitment on every occasion because it is so clearly understood by the public and the House as one of the Labour party's major commitments.
The right hon. Gentleman asked why we included proposals for child benefit. That was because they are highly relevant to Budgets in which child tax allowance used to be a feature. It looks as though we did some good by putting it into the shadow Budget because the Chancellor appeared to listen to what we said in our proposals.
I must move on to the other proposals——

Mr. Newton: Will the right hon. and learned Gentleman give way?

Mr. Smith: The right hon. Gentleman cannot complain because I have given way to him twice. He asked two absurd questions to which he has received adequate answers.
There are other items in the Budget, some of which my right hon. and hon. Friends will be disposed to welcome as the Labour party has, for many years, campaigned for them. I shall draw the right hon. Gentleman's attention to one. It seems at last to be recognised, at least for future conduct—I hope that the right hon. Gentleman will pay attention to this because it affects his Department—that a potential Conservative Government would uprate child benefit according to the inflation rate.
It is hard to believe that the Government are seeking congratulation on the abandonment of a posture of unfairness and obduracy that no Government should ever have contemplated, let alone pursued. They know full well that they broke an all-party understanding that child benefit—the product of the amalgamation of family allowance and child tax allowance—would be regularly updated in the same way as a normal tax allowance. In addition, they were perfidiously misleading in their shameful manifesto reference to the subject at the last election. Even now, when a sense of penitence on their part should have led them to make good the entire shortfall of the freeze, we have a proposal merely to increase the first child's benefit by £1, while the increase for other children is limited to a miserly 25p—all of which will not be paid, as I understand it, until October of this year. The Labour party proposed that the increase should take child benefit up to £9·55 for all children. Clearly, it will be left to the next Labour Government to put right an injustice which has been only partially, if revealingly, acknowledged in this year's Budget.
There are other items, such as the changes in mortgage tax relief——

Mr. Newton: rose——

Mr. Smith: The right hon. Gentleman should ask me whether I am prepared to give way. I think that he is clearly ambitious to join Treasury Ministers. I shall give way to him for one last time, but he must understand that I am being generous in giving way to him so frequently.

Mr. Newton: I acknowledge that, but the right hon. and learned Gentleman might acknowledge that the biggest single proposed item of expenditure in the shadow Budget was social security expenditure, to which I am about to come, and that the biggest single item of saving was the personal pensions incentive, to which I have referred.
The right hon. and learned Gentleman made a number of points on child benefit. I should like his comments on a point that I have put to him and his right hon. Friends—[Interruption.] The proposal that the right hon. and learned Gentleman put in his shadow Budget is costed in such a way that I million families on income support, and with more than 2 million children, would have gained no benefit. The proposals that my right hon. Friend announced yesterday give full benefit to all parts of the population, including the poorest. The document that he published——

Hon. Members: Come on.

Mr. Frank Haynes: On a point of order, Mr. Deputy Speaker—[Interruption.]

Mr. Deputy Speaker (Mr. Harold Walker): Order.

Mr. Haynes: This is disgraceful, Mr. Deputy Speaker. You should have stopped the Secretary of State for Social Security. He is abusing the procedures of the House of Commons. He will have an opportunity to speak in a day or two's time.

Mr. Newton: My question is simply this: is it or is it not Labour party policy, as costed in the shadow Budget, to spend £750 million on child benefit while giving no help to the poorest families on income support?

Mr. Smith: I fear that I cannot congratulate the right hon. Gentleman on a capacity for brevity. Having patiently listened for quite a long time to his third intervention, I believe that it is an abuse of the generosity that I have extended to him——

Mr. Michael Brown: How about answering the question?

Mr. Smith: I will answer the question in my own way and in my own time. The Opposition are well used to abuse from Conservative Back-Benchers, but I see that it has moved forward.
I give a straight answer. The difference between the Opposition and the Government is that we would have increased child benefit properly and they did not. That is what it is all about. Had there been a Labour Government, child benefit would be £9·55 per week for each child. That is not the case under the Government. If the right hon. Gentleman wanted to show support for the poorest people in our society, he has had plenty of opportunity to do so during his period in office.
As I was endeavouring to say, there are other items, such as the change in mortgage tax relief, which the Opposition support and which have long been resisted by the Government. Imitation is, in many ways, the sincerest form of flattery and I suggest that for guidance and enlightenment the Conservative party would be well advised to read the Labour party's policy statements with care and attention. [HON. MEMBERS: "We have "] I am glad to hear it. If they read them with a more open mind than heretofore, they will find some extremely attractive, eminently sensible and much-needed proposals to create the strong economy and the fair society to which an increasing number of our people aspire.
The Government are no doubt inhibited by a feeling that cheap imitation is no substitute for having policies carried out by those who believe in them and are committed to them for their worth—a view which I think will prevail in the coming decisions of the electorate.
But what caused many of the headlines following the Budget was the humiliating U-turn executed by the Government on the poll tax which was presaged by the increase in VAT of 2½ percentage points—a percentage increase of more than 16 per cent. in the tax.

Mr. James Arbuthnot: rose——

Mr. Smith: I have hardly said a word on this, but I will take a risk, as I did on a previous occasion, and give way to the hon. Gentleman.

Mr. Arbuthnot: Would a Labour Government reverse the transfer of local government taxation to VAT?

Mr. Smith: On the radio this morning the Chief Secretary said——

The Chief Secretary to the Treasury (Mr. David Mellor): I was asleep.

Mr. Smith: Well, the right hon. and learned Gentleman's voice was on the radio. He probably was asleep, but I certainly heard it. He said that it would be wise for us to suspend judgment on the question of local government taxation until the Government's full proposals had been revealed.
I gather that there is some irritation among members of the Government that one of their colleagues regularly leaks information in Central Lobby. Anyone who took a wander out there a day or two ago could have seen his minions in the act. It is well known that the Secretary of State for the Environment has been leaking like a sieve the proposals that are before the Government. He does not seem to have suffered much, so no doubt he will continue to do so. Since the Government do not tell us very much, we should be grateful for the odd crumb that we get from the right hon. Gentleman.
We will consider carefully what the Government put forward and when we see the Bill—we do not even know its title—we will be able to give a considered reaction.

Sir Peter Tapsell: If the Secretary of State for the Environment has been leaking like a sieve, why was everyone so astonished by the announcement about VAT?

Mr. Smith: The hon. Gentleman who, albeit unsuccessfully, worked assiduously for the Secretary of State for the Environment in the recent contest in the Conservative party——

Mr. Julian Brazier: Why not answer the question?

Mr. Smith: I am asked to give advice on something that is happening in the Conservative party, not about Labour party policy. I was asked to give my opinion about what the Secretary of State for the Environment was talking about. Well, he was not actually talking about VAT. He did not get that one. But he sought to capture publicity before the Chancellor's announcement about VAT. The wicked thought crossed my mind that he was trying to bounce some of his Cabinet colleagues into taking a decision at a particular meeting by drumming up support here and there for his proposals. As far as I can see, no one in the Government is denying that that process of leaking went on. But it is for the Government to decide how Ministers behave in their Administration.
The 16 per cent. increase in that indirect tax will mean that, when we buy the wide range of goods to which the tax applies—household equipment is an obvious example—or pay for services such as in our telephone bills, we will all be paying a poll tax surcharge. It is not clear to me—unless the hon. Member for East Lindsey (Sir P. Tapsell) can give me an opinion—whether the VAT proposal is intended to bury the poll tax or to keep it alive.
Conservative Members know perfectly well that many among them see in the Chancellor's VAT increase a possible lifeline for the continuation of the poll tax in one form or another. But of course the House of Commons has

not been shown the whole prospectus. It does not know whether the poll tax is to go or stay, what is the proposed allocation of services between central and local government or what financial burdens have been allocated and to whom. We get Budget proposals one day, we are told that a Bill will be presented on another, and although the House has not been told what the legislation contains, it is told that the normal processes of legislation will be steamrollered to suit the political convenience of a Government running hither and thither in a desperate attempt to extricate themselves from a poll tax fiasco of their own creation.
Enormous changes in the relationship between central and local government, of great significance to the balance of our constitution, are revealed in insidious leaks by the Secretary of State for the Environment and are then packaged in a panic form to be bulldozed through Parliament. Was there ever an example of more foolish or ill-considered government?
The latest burden in VAT increases is just the most recent cost of the poll tax fiasco. Hundreds of millions of pounds—I am generous in that estimate—have been wasted in the constant changes in local government administration and finance which have been imposed by the Government. The tragedy is that all the money could have been used to improve the services which local government exists to provide and which are the real victims of the Government's ludicrous incompetence.
Let it not be said, as I understand the Chancellor to claim, that the VAT increase that he proposes will not affect the cost of living. The system of retail prices indexing may be such that the effect of VAT increases can be statistically disguised, but, as many newspapers today have pointed out, that is little more than sleight of hand. The price increases will be real. They will be paid by our constituents, who will not be impressed. They are well capable of spotting another inflationary own goal coming in their direction.
Of course, the retail prices index will fall in the months ahead. That is statistically inevitable as previous price rises fall out of the calculation. One effect of flattening the economy and causing unemployment to rise is that inflation will fall. It would be wise for the House to look with some care at the detailed figures in the Red Book. The gross domestic product deflator, which measures inflation in the economy as a whole, rather than the limited bundle of goods contained in the retail prices index, remains almost unchanged, easing only from 7·75 per cent. in 1990 to 7 per cent. in 1991. That is still well above the equivalent GDP inflation rates of the other major European Community countries. Again, we must be wary of the Government's optimistic forecasts, in the light of the information buried in the statistics which they themselves have presented.
During the past 12 years the Government have indulged in the economics of the roller-coaster. We are back to the cycle of boom and bust, back to the stop, go and stop again policies which have been the chief characteristic of Conservative economic policy for decades. In the 1960s we saw the Maudling dash for growth, in the 1970s it was the Barber boom and in the 1980s the right hon. Member for Blaby and the present Prime Minister organised their own spend now, pay later credit spree.
There has been a Conservative boom and bust in each of the past three decades. Why on earth should anyone


believe that another Conservative Government in the 1990s would behave any differently from what they have done three times before?
The Budget confirms how little the Government and the Conservative party have learnt from their experience. I am sad to say that it is yet another missed opportunity. Sooner rather than later I hope that we shall elect a Government who are committed to making the breakthrough to economic success which is so desperately needed for our country in the 1990s. We need it if we are to secure our living standards and to help us build a more decent society. It will fall to that Government to present a Budget for investment and recovery. We in the Labour party look forward to that opportunity.

The Chief Secretary to the Treasury (Mr. David Mellor): Yesterday, my right hon. Friend the Chancellor charted the course of the British economy during the next decade and proposed measures designed to help business through the current recession and to maintain the momentum of a decade of supply-side reform. He introduced proposals to make the tax system fairer and to enhance the quality of life. Finally, my right hon. Friend announced a massive switch between local and central taxation—a switch that lays the foundation for a lasting solution to the problem of local government finance.
History will show that my right hon. Friend's first Budget was right for its time, right for the economy and right for Britain, and it certainly was not dull either. That is the almost universal view of today's press, the mood of which is well summed up by the Financial Times which, in the opening words of its editorial, said that the Chancellor
has played a difficult hand bravely and skilfully.
What is clearly recognised in that editorial, as in so many others, is that this Budget puts the long-term health of the British economy and British business first.

Mr. Giles Radice: Will the right hon. and learned Gentleman give way?

Mr. Mellor: It is very early in my speech, but I shall.

Mr. Radice: As he was quoting from the Financial Times, the right hon. and learned Gentleman might also have quoted the article by Mr. Samuel Brittan which said that this is not a Budget for business but a Budget to reduce the poll tax. That is the truth, is it not?

Mr. Mellor: It is not. It is a Budget for business and to reduce the community charge, and it succeeds magnificently in both. I shall come to the chapter and verse. It is to the discomfiture of Opposition Members that it succeeds so well.
So far in this debate we have heard speeches from he Leader of the Opposition, who, alas, is no longer present, and the shadow Chancellor—a winning combination, the Labour party would have us believe. I do not know whether they are familiar with the old Russian proverb about partnership, of which I am irresistibly reminded when listening to both of them. The Russians say that there are two people in every partnership—the one who chops the wood and the one who does the grunting. I do not know which was which. They were hotly competing for the title of the grunter, but it will be interesting to see how both of them have shaped up in this debate.
The Leader of the Opposition's performance was quite astonishing. I have watched him, as have my hon. Friends I am sure, for some years carrying out that task. It is certainly a difficult one. It is a real ordeal to have to respond immediately to a complex Budget. It is a difficult speech to bring off and it is the particular facility of the Leader of the Opposition to make it seem impossible.
Let me make clear exactly what I mean. First, most of his speech had been typed up well beforehand. [HON. MEMBERS: "So is yours."] If ever there was the wrong speech, by the wrong writer for the wrong occasion, that was it. It is a speech that we have already heard—[ Laughter.] Opposition Members may wish to hide their discomfiture about the performance of the Leader of the Opposition, but—[Interruption.] I thought that Opposition Members were supposed to be behaving well in speeches these days, Mr. Deputy Speaker, and showing us up.
I shall come to the chapter and verse of why the Leader of the Opposition was unwise not to discard his script. Everything in my script is predictable because of the predictable speech by the Leader of the Opposition, who said nothing new.
The Leader of the Opposition said that he had been listening to a "tinkering" Budget. Whatever it is, it certainly is not tinkering. I would like to hear the Leader of the Opposition's definition of a radical Budget if this is tinkering. However, it is a fitting tribute to the right hon. Gentleman's forensic skills that because his script said tinkering he continued to call it tinkering, although, as is perfectly obvious to everyone, this Budget is very different.
When it came to the spontaneous bits, the Leader of the Opposition was unable to keep up with his pre-prepared description of a tinkering Budget from a Government that he said "will not learn" because he went on to say that our child benefit proposals were "another spectacular somersault", and he had to describe the reduction in the community charge as
the biggest climb-down in … political history."—[Oficial Report, 19 March 1991; Vol. 188, c. 182]
He should make up his mind—is it tinkering or a U-turn? After all, he is supposed to be the decisive one. Mind you, Mr. Deputy Speaker, it cannot have been easy for him. All his favourite foxes were shot—the level of the community charge, mortgage relief, offshore trusts, and company cars. Perhaps the right hon. Gentleman should have been congratulated merely for continuing to stand there while all those rugs were pulled out from under his feet.
I wish to return to the substance of what the Leader of the Opposition said so that I have the attention of the right hon. and learned Member for Monklands, East (Mr. Smith) and to some of the matters mentioned by my right hon. Friend the Secretary of State for Social Security, which appeared in the Labour party's shadow budget. That has exposed, once and for all, Labour's claims to be the party of fiscal responsibility. Despite saying that the child benefit proposals were another spectacular somersault, the Leader of the Opposition went on to say that he wondered that the right hon. Gentleman had "the gall to come" to the House to announce them, but those measures will cost £450 million in a full year. Indeed, when taken together with the increase that is coming into effect next month, the full year cost is more than £700 million. I should have thought that the real gall is to say that one is financially responsible and then sneer at that level of


financial commitment. Heaven knows what would happen if the Leader of the Opposition were in charge with that sort of thinking.

Mr. A. J. Beith: Will the Chief Secretary give way?

Mr. Mellor: I will in a moment.
I would like to return to the point made by my right hon. Friend the Secretary of State for Social Security about the measures costed by the right hon. and learned Gentleman in the shadow budget. The right hon. and learned Gentleman will be aware that our proposals alter the income support level so that the poorest families, with a quarter of all children, receive the full benefit of the increase in child benefit. The right hon. and learned Gentleman sought to fudge what was said in the shadow budget. The trouble with publishing documents is that we read them and subject them to scrutiny. What do we find? We find the costing of his child benefit proposal at £775 million.
The right hon. and learned Gentleman is perfectly at liberty to intervene if I have got that wrong. However, it is clear that he knows only too well that £775 million is the costing if no allowance is made for families on income support. If he was to give the full benefit to the poorest families, the total cost would be over £1 billion. Once again, the figures just do not add up.
The right hon. and learned Gentleman seems to be studiously engaged in discussions with the hon. Member for Newcastle upon Tyne, East (Mr. Brown) to avoid the argument. If he wants to stand up and make it absolutely clear what he meant, I shall be happy to give way. Were the poorest quarter to be better off or not? Were the poorest quarter to have their income support varied on the right hon. and learned Gentleman's calculations or not? [HON. MEMBERS: "Silence!"] As I have said to the right hon. and learned Gentleman before, we hear plenty of quarter sessions huff and puff from him, but when we look for the beef, it simply is not there.
The right hon. and learned Gentleman has published a shadow budget riddled with errors and inconsistencies. We have already exposed the hole in the middle of the child benefit proposals, but there are more. There is the repudiation, which he acknowledged this afternoon, of Beckett's law, which stated that Labour had only two priority spending pledges—pensions and child benefit. We know, and he has acknowledged, that a raft of additional measures on training, capital allowances, temporary work programmes and so on was included in the shadow budget.
When it comes to paying for all that, the whole thing begins to fall apart. The right hon. and learned Gentleman may want to clarify other points in the shadow budget, and that would be helpful to us all. First, £1 billion of the cost of the shadow budget was to come from withdrawing mortgage tax relief from top-rate taxpayers and reducing the subsidy on company cars. We have done that, and money cannot be spent twice. What is next in line? Sooner or later the right hon. and learned Gentleman may have to return to the subject that always embarrasses the Labour party so much—the level of income tax. Labour Members have been anxious not to commit themselves on that topic since the fiasco of their promise at the last election that income tax would have to go up to 29p in the pound.

Mr. Harry Ewing: Will the Chief Secretary give way?

Mr. Mellor: No. I want to deal with the right hon. and learned Gentleman's shadow budget; I shall give way after that. There will be plenty of time.

Mr. Ewing: rose——

Mr. Mellor: I will give way when I have finished dealing with the shadow budget. That is perfectly fair. The hon. Gentleman must be patient.

Mr. Ewing: rose——

Mr. Deputy Speaker: Order. The Chief Secretary has made it clear that he will not give way.

Mr. Mellor: According to the shadow budget, £619 million for investment and recovery will come from ending the 2 per cent. personal pension incentive. That figure has a nice ring. It sounds accurate, because it is not a round figure, and some people might be taken in by it. As has been made obvious this afternoon, they should not be.
The right hon. and learned Gentleman may benefit from what I am saying next time he has a go at the same exercise. The elimination of the 2 per cent. personal pension incentive would yield, not £619 million, but about £10 million a year. Where, then, does this little pot of gold come from? As my right hon. Friend the Secretary of State for Social Security has made clear, it comes from the retrospective removal of the 2 per cent. rebate that has already been given to 4·3 million of our fellow citizens who have opted out of the state earnings-related pension scheme and taken up private pensions.
I shall make myself available to the right hon. and learned Gentleman if he wants to correct any of what I have said. I shall be happy to give way to him.

Mr. Ewing: Will the Chief Secretary give way?

Mr. Mellor: No. These diversionary tactics are useless. I am keeping my eye on the Opposition Front Bench.

Mr. Ewing: rose——

Mr. Mellor: I will not give way. I am sorry that the hon. Gentleman does not want to hear the rest of my argument. I shall give way to him after I have finished dealing with this passage in the shadow budget.
The retrospective removal of the 2 per cent. rebate would rob a man on average earnings of a £272 contribution to his pension scheme for this year alone, and would slash his pension contributions by £5 per week. Is that really what the Labour party wishes to do to millions of working people up and down the country?

Mr. Ewing: rose——

Mr. Mellor: The hon. Gentleman has been in the House long enough to know better.
The Labour party is in considerable disarray on this point. I do not know to what extent the hon. Member for Oldham, West (Mr. Meacher) is privy to the discussions that result in the shadow budget, but he assured my right hon. Friend the Secretary of State for Social Security that the proposal was only for the future. Is it, or is it not? Does the right hon. and learned Gentleman wish to intervene to tell me the answer? If so, I am anxious to give way to him. Surely the Labour party should know what its policy is.

Mr. Ewing: rose——

Mr. Mellor: Diversionary tactics are no use. Is the proposal for the future, or is it not?
Silence speaks volumes; sometimes it speaks louder than words. The right hon. and learned Gentleman will not intervene, even with a lengthy, lawyer-like evasion. Labour will have to sort the matter out. It is clear that if Labour wishes to persist with the idea that £619 million will be saved, it will have to face the wrath of 4·3 million of its fellow citizens whose money will be taken back from them. If the removal of the rebate is not retrospective, however—if it is only for the future—the £619 million figure becomes £10 million, and knocks a hole in the heart of this so-called responsible document, the shadow budget. [HON. MEMBERS: "Give way"] No. I am still dealing with the shadow budget. I shall be happy to give way later, but I have not yet finished discussing the anomalies in the document. For instance, it refers to closing the tax loophole available through offshore trusts. Labour implies that that would be worth £1 billion. As the right hon. and learned Gentleman knows, we have closed that loophole. The Inland Revenue's estimate of the benefit to be gained from closing it is £100 million—

Mr. John Smith: That is the Government's estimate.

Mr. Mellor: The right hon. and learned Gentleman, who is recovering his composure and voice, says insouciantly that it is our estimate. It is not our estimate. It is the Inland Revenue's estimate—the same Inland Revenue as would have to advise him if he were Chancellor.
Our proposal will be more professionally drafted than the right hon. and learned Gentleman's proposal for closing the same loophole last year, and it is more far-reaching than his, yet it yields only one-tenth of the amount that the shadow budget says will be forthcoming. In one of his more memorable phrases, the Leader of the Opposition said yesterday that the Government's plans were a con. The biggest con in this debate is the Labour party's shadow budget. Until we get answers—we certainly have not had any this afternoon—it will not just be Conservative Members who think that it is a con.

Mr. Ewing: rose——

Mr. Mellor: I shall give way.

Mr. Ewing: Such generosity bewilders me, but I am grateful to the Minister for giving way. From his briefings, will the right hon. and learned Gentleman tell the House and the country what percentage of an average income is now paid in direct taxation—income tax and national health insurance—as opposed to when the Government took office? Is the Minister aware that many of my constituents would be over the moon to pay a higher rate of income tax if they could get a job to enable them to pay tax? The Prime Minister has done away with many jobs since coming to power.

Mr. Mellor: Direct taxes are down. If the hon. Gentleman wants to talk about the average family—the man on a national average wage with a non-working wife—he must be aware that after five years of Labour government that man was one pound a week better off. After 12 years of Conservative Government he now has £58 more in his pocket. That is the reality. [Interruption.]

I have answered the question. If the right hon. and learned Member for Monklands, East answered questions so candidly, we should have got a bit further this afternoon.

Mr. Ian Stewart: Will my right hon. and learned Friend monitor the shadow Chancellor's broadcast tonight to make sure that he does not mislead viewers in the same way that he has misled us by using phoney figures in the shadow budget?

Mr. Mellor: Unless the right hon. and learned Member for Monklands, East has already recorded the broadcast, he will have some time to rethink some of the points that have been made.
In the time that remains I shall return to the central proposition in the Budget. [Interruption.] I have answered the question of the hon. Member for Falkirk, East (Mr. Ewing) and in a way that discomfited him. I provided a statistic that the hon. Gentleman is unable to disprove. I said that the average working man is £58 a week better off after 12 years of Conservative government. I am prepared to answer that question 10 times every day because it does not embarrass me.
The right hon. and learned Member for Monklands, East properly spent time discussing the environment for business. The Chancellor predicted that inflation will fall to 4 per cent. by the end of the year and that will provide a great fillip to national self-confidence and morale. It is a clear sign we are on the right track. Obviously there is no painless or quick way to conquer inflation, but this time there will be sustained progress and the low figure will be maintained. The decision to join the ERM last October was a clear signal of our overriding commitment to stay the course and to stick to the task until inflation is decisively defeated. The prospect of sharply falling inflation provides the assurance that business needs that the recession will soon be behind us. The Budget provides more than reassurance for business; it provides action.
This is a good Budget for business.

Dr. Lewis Moonie: Will the Minister explain in his preamble on economic success how a contraction of 10 per cent. in fixed investment provides an effective springboard for that?

Mr. Mellor: The hon. Gentleman realises that there has been an unprecedented expansion in business investment over the past decade—80 per cent. over eight years and nearly 50 per cent. in the three years from 1986 to 1989. Inevitably, from that very high plateau, there has been some falling off. This is a Budget for business, which increases companies' liquidity and will allow investment to rise again. As the hon. Gentleman knows, there is no such thing as a straight line in these matters.

Mr. Beith: Will the right hon. and learned Gentleman give way?

Mr. Mellor: I want to push on a little more. I shall give way to the hon. Gentleman later. If I give way, I shall simply spend my whole time giving way and not making the points that will allow some of my hon. Friends and other hon. Members to intervene.
Our proposals look forward to the next decade. They build on the major reforms carried out by my right hon. Friend the Member for Blaby (Mr. Lawson) who, in a reform of business taxation in 1984, cut corporation tax


from 52 per cent. to 35 per cent. and removed accelerated investment allowances and gave tax relief at rates that more closely reflected commercial depreciation.
As I have already said, we were told that that was the end of capital investment as we knew it. It was, but in a way different from that assumed by the critics. There was an unprecedented increase in company investment not only in terms of money expended, but in terms of quality—investment that was not distorted by the availability of allowances and that made the investment seem good, whether or not it was profitable. Today, the entrepreneur makes his own decision on whether to invest and he reaps his reward—if he gets the decision right—by having a low taxation business economy. Those reforms have stood industry and commerce in good stead. They have been good for the entire nation.
Over 3 million jobs have been created since 1983 and we have become an attractive place to invest, not only for British entrepreneurs but for entrepreneurs from Japan and the United States. In recent years, the Americans have put two-thirds of their investment in the European Community into Britain and the Japanese have invested over 40 per cent.

Mr. Robert Sheldon: I understand the right hon. and learned Gentleman's point about investment being related to profitability. However, in the case of capital allowances, only 25 per cent. is allowed in the first year. To think that one can use a piece of equipment for one year and sell it for 75 per cent. of its worth is nonsense in many areas of capital equipment purchase. That 25 per cent. is probably eaten up by the commission for the seller. We are getting not a capital incentive but a disincentive. It is the removal of that which is important.

Mr. Mellor: It is a better rate than commercial depreciation. The right hon. Gentleman knows that the record of the past 10 years is that there has been an upsurge of investment. It is better to look at the outcome of policies than at academic points. [Interruption.] The facts speak for themselves. The level of business investment in Britain has never been higher. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) spoke about disincentives. When he held responsibility, the incentive was to invest, whether good or bad. That is not an improvement.
In the Budget we have seen major changes in corporation tax. The first change is to reduce corporation tax rate in two stages to 33 per cent., which means that once again we have the lowest company taxation rate in the developed world. It also looks after the smaller businesses. Over 4 million businesses do not pay the main rate of corporation tax. We have already done much to help them in times past but now, building further on the enterprise culture that has been created in the past decade, my right hon. Friend the Chancellor has dramatically raised the profit limit for the lower rate of corporation tax. He has also pushed up the VAT registration threshold by no less than 40 per cent. to £35,000. He has cut down bureaucracy and tax forms and helped cash flow by delaying PAYE, national insurance contribution payments and so on.
What does all that mean in terms of improved cash flow to business this year? Some £380 million is to come from corporation tax, and that is only the 1990–91 retrospective cut, not the cut that is to come next year; £150 million is already due to come from bad debt relief, now there is a further £190 million on top, and £210 million is to come from later payments of PAYE and national insurance contributions. A further £25 million will come from the lifting of the VAT threshold, and a further £30 million from the reduction of the serious misdeclaration penalty. All that represents a transfer from the Exchequer to business of almost £1 billion, directly benefiting business across the spectrum. That is where companies will find extra resources to invest.

Mr. Beith: Welcome though the changes are, does the Chief Secretary accept that the "Financial Statement and Budget Report" reveals that £2·2 billion extra will be paid by business next year under the uniform business rate?

Mr. Mellor: The hon. Gentleman knows very well that the uniform business rate removes the uncertainty that was created by the extraordinary changes in the business rates imposed by a number of local authorities. He also knows that business rate increases cannot be above the rate of inflation, whereas, during the past decade of local authority control of business rates, they increased by 40 per cent. over the rate of inflation. The hon. Gentleman does not make a good point if he suggests that we may have been wrong to change the system.
Given that this is a Budget for business, what matters is not what the Opposition say—they have an interest in deriding what is said and done—but what is said by the business community. Rarely has the business community greeted a Budget with such a chorus of approval. Sir Brian Corby, the president of the Confederation of British Industry—[HON. MEMBERS: "Scotland?"] He is the president of the CBI nationally, and we are one nation. Sir Brian Corby said:
This is almost precisely the Budget that the CBI recommended—a Budget for soundly based recovery, for saving and for investment. The prospect for further reductions in interest rates, a resumption of growth and low inflation are better tonight than they were this morning. The Chancellor has listened to those who create the nation's wealth.
The Chancellor has taken the action that the Institute of Directors asked for—on corporation tax, VAT, bad debt relief and the carry-back of losses. The relief to business will be a major help to those with cash flow problems. The IOD said of the Budget:
It addresses the immediate economic ills of business as part of an imaginative long term fitness campaign and the promotion of the individual in the market economy.

Mr. Paul Boateng: Jeffrey Archer wrote that one.

Mr. Mellor: I am sure that the hon. Gentleman would find it helpful if he applied his mind to these matters a little more seriously.
The National Federation of Self Employed said:
This is a Budget to bring a smile to small businesses.
When did the organisation last say that about a Labour Budget?
The Association of British Chambers of Commerce said:


He really listened to everything we had to say. Chambers are delighted at the practical measures of support to help businesses during a difficult time. This was a Budget for business we needed.
My right hon. Friend the Chancellor deserves congratulations for eliciting such praise, which is not often given readily and which is given in genuine appreciation of his achievements.

Mr. John Garrett: Will the Chief Secretary explain why the Red Book shows such a remarkable increase in labour productivity in the coming 18 months coupled with such a remarkable fall in productive investment?

Mr. Mellor: We shall see. [HON. MEMBERS: "No, we will not."] The hon. Member for Norwich, South (Mr. Garrett) asked a serious question and I shall give him a serious answer. He knows very well that the expansion in business investment which has already been referred to—it has almost doubled over the past decade—will feed through into increases in productivity. That is the basis for that investment, which will not be distorted by bogus allowances. Such genuine investment will maximise production opportunities. That is the answer to the hon. Gentleman's question, although it may not be to his taste.
What does the Budget do for the supply side? One of the great strengths of the past decade has been the supply-side reforms to which the Government have paid so much attention. Our record speaks for itself. We took a machete to the jungle of banana-republic controls that existed under the Labour Government. Pay, price and dividend controls all went. Hire purchase controls were swept away and foreign exchange controls were abolished.
All those reforms liberated British industry and brought benefits that will last well beyond the end of the decade. Yesterday, we took a further major step forward in the supply side. My right hon. Friend gave profit-related pay a further important boost when he announced that, in future, the profit-related element would be entirely free from tax. That is particularly important when profits are under pressure and firms may be tempted to shed labour. Profit-related pay helps companies to contain labour costs without losing jobs, and provides the work force with incentives, which the Chancellor's proposals for share schemes will also do. We are not keeping share schemes in the boardroom. We have given incentives for them to spread to the shop floor. That is an example of the Conservative party's approach to industrial democracy which, in the long run, will prove far more efficacious than anything that the Opposition propose.

Mrs. Edwina Currie: Is my right hon. and learned Friend aware that in areas such as south Derbyshire and Derby, where major engineering industries continue to do well and are optimistic about the future, employee share ownership schemes play a major part in ensuring that employees not only understand the way in which their businesses work but are committed to them, which enables businesses to do well?

Mr. Mellor: That is absolutely right. That is why my right hon. Friend the Chancellor introduced those measures.
We have heard a great deal from the Opposition about training. It is a good thing if there is a commitment to training on both sides of the House, but it is a bit rich for our record to be criticised given that our expenditure on

training this year is £2·7 billion—two and a half times in real terms what the Labour Government were spending, even though unemployment more than doubled under Labour. Under the Labour Government, when did the unemployed have the opportunity of job clubs, employment training, the advice that is given at regular intervals and the job guarantee scheme?
We must also take into account the fact that some people wish to take responsibility for their own training needs. That is why we have recognised that we have a role in supporting employees who wish to help themselves, and the tax system should not stand in their way. That is why my right hon. Friend announced a new tax relief for people enterprising enough to get training for themselves. That was warmly welcomed by the training and enterprise councils and the business community and is a further major contribution to supply side reform.
Let me say something about the changes to the community charge. In recent weeks, there has been much talk about fair taxes—particularly in relation to the community charge and the level of local taxation. My right hon. Friend the Chancellor tackled both issues head on. The package that he announced yesterday brought the community charge throughout the country down to what the Government regard as a fair and tolerable level. Indeed, in some of the best-run councils in the country there will now be no charge to pay at all.
Opposition Members have already started to say that the proposal for an across-the-board reduction in the community charge by £140 is not fair. The switch to VAT is fair, sensible and fully in line with the Government's wider tax objectives. VAT is a pay-as-you-buy tax. The more you buy, the more you pay. The essentials of life—food, housing, domestic fuel, power and even public transport—are all zero rated, so these goods bear none of the burden of reducing the community charge. For lower income groups, zero-rated expenditures account for a higher proportion of total spending than they do for the better-off. As a result, VAT accounts for a larger proportion of household expenditure the higher the income of the household.
Opposition Members are, as usual, facing all ways at once. On the one hand, they want higher investment and higher savings; on the other, they seem to be opposed to switching from a tax on income to a tax on spending. On the one hand, they shout from the steeples that the community charge hits the poor; on the other hand, when we reduce the community charge they tell us that too, hits the poor. [HON. MEMBERS: "Abolish it."] Are the Opposition proposing to abolish local government and local government services? Labour councils have contributed to the overspending that has led to unacceptably high community charges. Perhaps only Scotsmen on the Conservative Benches believe that "You canna spend what you have nae got." If a Labour Government—if there ever is one—wants to sustain Labour councils, they would have to find a way to resource their extravagances. By reducing the community charge, we have proved that there is no free lunch. If the reduction has to be made through local taxes, the only honourable and principled thing to do is to impose them on national taxes while continuing to press local authorities to improve efficiency.

Mr. Stuart Bell: One of the principles that we understood was very important to the


Conservatives was accountability. If the people of Wandsworth are to be subsidised by the people of Teesside and pay no community charge, how can the council be held accountable by the local community? If the charge is £1 in the Orkneys, how can that council be held accountable by the local community?

Mr. Mellor: The council is reaping the benefit of being efficient. Wandsworth has the second lowest amount of Government assistance of the inner-London boroughs. It receives a much smaller amount of money per head from the Government than Lambeth, but the community charge in Lambeth will be £450 due to the feckless irresponsibility of Lambeth council. Far from accountability being abolished, it is just as sharp. Throughout the country it will be possible to draw differences between sensibly run councils and foolishly run councils, and the communities will be able to make choices.
Over the past few weeks there has been a great deal of speculation that this would be a small or insipid Budget. No doubt the commentators are feeling a little foolish about those predictions today. My right hon. Friend the Chancellor has introduced a Budget that manages to be both prudent and imaginative. It reinforces the Government's central aim of defeating inflation and it contains a number of important measures to help business through the recession. It also contains particular help for small businesses.
The Budget helps families. More than that, it helps all community charge payers and it continues the Government's policy of making the tax and national insurance system fairer. Above all, the Budget tackles the big issues. This is not the Budget of an indecisive Government. It is the Budget of a confident Government who are ready, willing and able to go on and on.

Mr. Roy Hughes: We are debating today the Chancellor of the Exchequer's first Budget, the production of which is by common consent an awesome task. We welcome the VAT assistance to small businesses and the concessions on corporation tax. We also welcome the commitment on mortgage relief which is to remain at £30,000, but only on the basic rate. The Chancellor is also trying to organise additional support for sport and the arts through the pools promoters. However, those proposals can be summed up as small beer.
The Prime Minister also introduced only one Budget, and it is reasonable and fair to say that, since then, the British economy has gone from bad to worse. The country is now in severe recession. When preparing his Budget, the Chancellor saw the imminence of a general election. He knows that that major political event is drawing even closer and he considered the warring factions in the Conservative party, particularly in respect of the nightmare of the poll tax.
The Daily Telegraph, that organ of Conservative thought and opinion, on 14 March described the poll tax as
the biggest self-inflicted political wound of modern times.
The poll tax was the personal crusade of the right hon. Member for Finchley (Mrs. Thatcher). It was the flagship policy of her Government. However, it is clear that the ship has run aground.
I appreciate that any Chancellor of the Exchequer must be concerned about income and expenditure. I understand that the poll tax will cost £500 million to collect in 1991–92. The cost of collecting rates would have been a fleabite in comparison.
The Chancellor must have used his blinkers in reading the Audit Commission's report that was issued a few days ago. The report reveals that more than 7·5 million summonses will have to be issued. It states that courts will need a significant injection of resources if they are to cut the backlog of cases. Most councils have had to resort to borrowing to bridge the gap between current expenditure and what they hope eventually to collect. The Audit Commission's report tells a story of delays, backlogs, bad debts and underpayments, all coupled with a colossal administrative work load.
I did not exaggerate when I described the poll tax as a nightmare. The Chancellor seems to have reached the same conclusion. Yesterday, he announced one of the biggest turnarounds in modern political history: the switch of £4·25 billion expenditure from local to central Government, with the leeway made up by a 2·5 per cent. increase in VAT.
The Labour party has long recognised that there is too much financial pressure on local government, but the Government's move is essentially a panic measure in an attempt to save the Conservative party's skin at the forthcoming general election. The Government have discovered that the poll tax is impossible to collect while VAT amounts to cash on delivery. Apparently there is to be a further chapter in this remarkable episode—or what I describe as a skin-saving exercise—when the Secretary of State for the Environment makes his statement tomorrow. There has been speculation—as well as suggested leaks—about the Government reducing local government to one tier and transferring certain services to direct central Government control.
I have always had considerable regard for British local government. Before I became a Member of this House, I served on a major local authority. I appreciate that there have been a few rogue elephants in recent years, but over the years local government has served Britain well and is very much a part of our democratic tradition. I have never been convinced that the man in Whitehall necessarily knows best. I warn the Government that restructuring local government and also reorganising its revenue-raising powers is a pretty tall order. Administrative costs could be substantial, and chaos could be caused. Last Thursday, the latest unemployment figures showed that no fewer than 2 million people are out of work. The total is rising by about 80,000 a month. On present trends, the jobless total could top 3 million in a year. This year, no fewer than 20,000 businesses will go to the wall. Business investment will fall by 16 per cent. when the rest of Europe gears up for the 1992 single market. Last year, 44,000 homes were repossessed by building societies and banks—that is easily a record—and mortgage arrears are now at record levels.
I am particularly concerned about the situation in Wales. Unemployment is again at more than 100,000. For males, the figure is 10·3 per cent. Of course, that is without any allowance for the doctoring of statistics in which the Government have engaged in recent years. Listening to the Secretary of State for Wales during Welsh questions on Monday one would have thought that he was achieving the mother of victories. Perhaps he has been taking lessons from Saddam Hussein. Sadly, one third of unemployed


people in Wales have been out of work for more than 12 months. Approximately one third are under 25. What a waste of a priceless asset—our young people. Much of our unemployment is directly due to the rundown of British manufacturing industry.
I recall the right hon. Member for Blaby (Mr. Lawson), when he was Chancellor, saying that manufacturing industry was no longer important. Earlier this month, the House of Lords Science and Technology Select Committee produced a report entitled "Innovation in Manufacturing Industry", which made the serious accusation that, in the 1980s, there was virtually no net investment in British manufacturing industry. What an indictment or the vintage Thatcher years. The present Chancellor, when he was in the lower echelons of Government, used to talk about the British miracle, and he repeated that theme yesterday. He compares our achievement with those of Germany. Some British miracle; some comparison.
The House of Lords Select Committee also found that the United Kingdom was the only country in which gross domestic expenditure on research and development declined as a percentage of gross domestic product over 1981–88. That decline was largely the result of the reduction in Government support for research and development. That has happened despite the oil wealth and the privatisation proceeds that were poured into the Treasury coffers. It is no wonder that British economic output per head is now lower than it was two and a half years ago. That decline, that mismanagement, can no longer be accounted for in terms of idle employees or obstructive trade unions. The heart of the problem is the Government's managerial incompetence.
The weakest. such as pensioners, are losing. If state pensions were uprated in line with earnings, a single pensioner would be £11·75 a week better off, and a married couple would gain £18·95. Of course, there was no mention in the Budget about any increase for pensioners. I am glad that the Government have rediscovered the virtues of child benefit. It is a welcome move, for it gives most help to low-income families, who account for three quarters of those receiving child benefit.
The Chancellor seems to be relying on a reduction in interest rates to get him out of his difficulties. I agree that interest rates are a major economic indicator, but for two and a half years they have languished at around 15 per cent. As a result, we have suffered a damaging dose of monetary overkill, which was inflicted on the country by a Government who, even after 12 years in office, lack self-confidence and credibility.
Of course we welcome the recent decreases in interest rates, because lower interest rates are vital to restore industrial confidence, to ease family budgets, and to get the country out of the recession in which the Government have put it. Of course inflation will come down. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, that is the inevitable consequence of recession.
However, the real problem is the weakness of our industrial capacity and competitiveness. We need to invest in our manufacturing industry. A Labour Chancellor would help to reverse the decline. We need a new programme of expenditure on training, not cuts of £245 million, as was announced recently. Likewise, we need a temporary employment scheme to assist the unemployed. I have often said that unemployment is like a tap that is left running—sheer waste.
I conclude on the point with which I began. This is the Chancellor's first Budget. The nation faces enormous problems, but the Budget will do nothing to solve them. The measures that he has introduced are essentially panic-stricken, in an effort to save the Tory party at the polls. The Chancellor will not succeed, because people will eventually realise that the major problems of the economy remain as vivid as ever. We have a massive trade deficit. How much longer can we finance it? We have 2 million unemployed, and the number is fast increasing. Also, there is a continuous decline in manufacturing industry. A change of Government is urgently needed. A Labour Chancellor will introduce the necessary measures once again to put Britain back on the road to recovery.

Mr. Alan Haselhurst: I begin by declaring my interests, which are all listed in the Register of Members' Interests, as some of them may be thought at least partly to inform some of my remarks, although I dare say that some of my comments are blindingly obvious.
I congratulate my right hon. Friend the Chancellor on an excellently presented Budget. If it was a beginner's Budget, I hope that he will have opportunities to present many more. He hoped that his Budget would be known as a Budget for business. It probably is a Budget for business, but he will have some difficulty in getting that title to stick, at least in the early days, because of its dramatic impact on local government finance.
I make no bones about welcoming my right hon. Friend's direct approach to local government finance. I agree that it has become unsatisfactory that the share of the cost of local government services has shifted more towards the local taxpayer, and away from taxpayers at a national level. The correction that he has made is a good one.
However, it will always be difficult to convince people about the way in which local government services should be financed. There is no doubt in my mind about the unpopularity of the community charge. I have had plenty of letters on that score, but interleaved with them have been many other letters saying that more should be spent on local government services. People constantly ask for improvements. Indeed, both those points have sometimes been made in the same long letter of complaint about the community charge. Some letters have started with a complaint about paying the community charge, but ended with the demand that more money should be spent.
People must realise that there is no magic cure to this problem., somehow or other, the costs of the services must be financed. We have a choice between tying the payment to property, which does not move, or to people, who do move—and, my word, how people move. Apparently, my own electorate has shrunk by 3,000 in the past year. I do not believe that that is because of any decay in my area. People have disappeared. That highlights one difficulty about taxing people rather than property.
If one wants to tax people effectively, one must do so either through their income or through their spending. I do not believe that we should be looking for ways of increasing direct taxation—so that leaves only indirect taxation. In the circumstances, the system that my right hon. Friend has chosen, which is to put extra on VAT, is perfectly reasonable, because those who spend more will


pay more and those whose incomes are spent largely on the essentials of life will not make a particularly heavy contribution.
It is difficult for the Opposition to seek to stigmatise VAT as regressive while continuing to embrace the idea of domestic rates, because nothing in domestic rates made that form of taxation essentially progressive. What my right hon. Friend has done is therefore absolutely right, because we shall now have a more sensible balance and distribution of costs between national and local taxpayers.
My right hon. Friend the Chancellor probably hoped that people would regard his Budget as a green Budget. Conclusions on that point may be somewhat qualified: the Budget has green tinges, but obviously not enough for some people. We need to face the fact that my right hon. Friend's attempt to include environmental considerations in his Budget will undoubtedly hit certain people very hard. The increase in excise duty on petrol and the increase in the taxation on company cars will not be welcomed by a great many people. There will not be any singing and dancing in the streets by the people who will be affected by those taxation changes.
Even so, what my right hon. Friend has done is evidently not enough for the thoroughly green parties in this country. Writing in today's edition of The Independent, Julie Hill of the Green Alliance states that the 15 per cent. increase on excise duty on petrol
is unlikely to have a significant effect.
I hope that, when people at the pumps are paying an extra 16p, 17p or 18p per gallon, they will remember that the Green Alliance thinks that that is not nearly enough of an increase.
My right hon. Friend the Chancellor has been sensible to deal with such matters progressively and in not deciding simply to make a gigantic switch that would grab the headlines. If he had done so, he might have received plaudits from the Green Alliance, but he would not have received many from the people outside. People are not ready for such a comprehensive switch in taxation.
Julie Hill of the Green Alliance also stated: company cars are still unjustifiably subsidised".
That may be so, but in taking a further step in taxing that benefit my right hon. Friend has adopted the right approach. Those who would plead for more to be done more quickly on that issue are forgetting that such moves would have a serious effect on the car industry, which is going through a difficult time, and that such a policy would also be difficult for those who earn their living in the manufacture of motor cars.
My right hon. Friend the Chancellor took another step towards the environmental lobby by increasing the duty on tobacco by more than the rate of inflation. I very much welcome that, but I am afraid that I would go further. Although I speak with the prejudice of a non-smoker, I believe that it is nonsense that we continue to include tobacco in the retail prices index. I hope that the House can reach a general agreement that the Government should re-examine the RPI and remove tobacco from it. Logically, I must add that alcohol should be similarly considered—[HON. MEMBERS: "Why?"] Because tobacco and alcohol are the bolt-on extras to the cost of living. They are by no means essential, and I do not see why the RPI should be bolstered by products that the Government believe harm health—and that are proven to harm health.
As we are urging people to curb their consumption of such products, I do not see why they should be allowed to boost the RPI and, as a result, to boost spending.
My right hon. Friend the Chancellor could have gone a little further with provisions affecting motoring without embracing the vengeful approach of the green parties. If we are to keep vehicle excise duty, I do not see any justification for freezing it at its present level for all motor cars. It would be sensible to adjust it according to the size of the car. If we are not to use VED in that way, we might as well forget about it.
I know that the former Paymaster General, my right hon. Friend the Member for Mid-Norfolk (Mr. Ryder), has argued that adjusting vehicle excise duty by, say, £10 or £20 would have only a small effect on people's choice of car when they are contemplating expenditure of several thousand pounds. But who is thinking of £10 or £20? I am thinking of something much more dramatic. A 1,000 cc car may well attract vehicle excise duty of £100, but why should not a 2·5 or 2·9 litre car bear a vehicle excise duty of £300 or £400? That would influence people's choice of motor car and drive them towards smaller and more fuel-efficient cars. That idea deserves greater consideration.
The gap between unleaded and leaded petrol should be widened. I welcome the fact that my right hon. Friend the Chancellor widened that gap somewhat in his statement yesterday, but it already seems to be being interpreted as a differential of only 2p in the price at the pumps, despite what my right hon. Friend said about 3p per litre on unleaded petrol and 4p per litre on leaded. Cannot that gap be widened without cost to the Exchequer?
I wish to make a similar point about catalytic converters, in which I have a particular interest. By law, they will be necessary on all new cars from 1 January 1993, but a boost could have been given to their early purchase now, either through VED or through the car tax. Again, that would have helped the car industry at a difficult time, and might have persuaded a few more people that it would be worth buying a new car now rather than putting it off for a few more months. On balance, therefore, my right hon. Friend the Chancellor made some sensible decisions on environmental measures.
However, I come back to the question whether it was a Budget for business. I believe that it was. My right hon. Friend is to be congratulated on putting the emphasis on corporate rather than personal taxation. The real test is whether the Budget will get us out of the recession. That judgment may depend on how quickly and by how much interest rates come down. Understanding the exact characteristics of a recession is not easy. They can sometimes be long and shallow, or short and shallow, or short and deep. This time people have been laid off, but not many factories have closed. There has been a great deal of investment over the last three years, the effects of which have to come through. I believe that the pick-up may be swift.
Manufacturing industry feels neglected and unwanted. I agree with my hon. Friends the Members for Hertfordshire, South-West (Mr. Page) and for Staffordshire, Moorlands (Mr. Knox) that we must give more emphasis to manufacturing industry. People in manufacturing are a little like teachers: they do not think that the Government compliment them enough. The fact


that some good words are said about them does not seem to affect them. They notice only the occasional critical comments.
Manufacturing is important. The only way that the country will survive is by our success in making and selling things. The sooner the Government make it clear to the industrial sector that they think the same, the better. We must revive confidence. Confidence will depend on low inflation. The Budget is headed determinedly in that direction. Confidence will also come from oil price stability, which fortunately we seem to have. It will come too from exchange rate certainty, which is also implicit in the Budget.
I believe that the Chancellor's mixture is right to achieve the cure that industry as a whole and manufacturing industry in particular need. We can look forward with confidence to a substantial and sustained economic recovery over the next few months.

Mr. A. J. Beith: The Budget and most public discussion of it has been dominated by the poll tax: £10 billion later, we still have the poll tax, extra VAT, the prospect of a new property tax tomorrow and water rates which are rising to levels above those of the old rates. Of course, water rates still operate on the rating system. One curiosity tomorrow will be to find out what will happen to water rates now that property taxes seem to be back in the Government's favour.
In order to proceed with the changes, parliamentary procedure will be drastically truncated, with no proper debate on the Bill which will be necessary to implement. the shift in local finance. I remind the House that, when measures are not properly debated and amendments are not properly considered, great mistakes are made and magnified. That happened with the poll tax originally and will be even more evident if there is no proper debate on the details of the new Bill.
The result will be no adequate tax base for local government, with local government finance divided over several taxes, and a weakened local government system, with more power taken to the centre. That could all have been avoided if the Government had gone for a local tax in the first place.
In any other walk of life, people rarely have opportunities to make mistakes on the scale of the poll tax mistake. If they make colossal mistakes, they are apt to lose their jobs. I can think of no better case for people losing their jobs than the scale of the errors made on the poll tax. So the first problem that the Government addressed in the Budget was the poll tax mess that they themselves had created. The second was the economic mess——

Mr. Toby Jessel: Before the hon. Gentleman leaves the subject of the poll tax, will he say whether he is in favour of reducing it by £140 per head? Does he intend to vote accordingly?

Mr. Beith: I shall certainly not oppose the reliefs which are to be given to poll tax payers. The poll tax is incapable of bearing the levels of charge being put on it. It is an unfair system of tax, and relief should be applied. It would have been much better not to have it at all but to have a fair local income tax, which would not have needed to be baled out.
The second problem which the Government had to address in the Budget was the economic mess which they created, with a recession, rising unemployment, high interest rates and high inflation. That meant that the Chancellor had to convince the markets that he would be fiscally responsible and firmly committed to maintaining sterling's position in the exchange rate mechanism.
That is all well and good, and the Chancellor has made a reasonable attempt in the Budget to demonstrate that fiscal responsibility and that commitment. But they could have been achieved more clearly and over a longer period by announcing the measure that we proposed, of greater independence for the central bank on monetary policy. That would have removed the need for the premium on interest rates which arises from uncertainty about the Government's attitude to monetary policy and the level of sterling. That would have allowed us to loosen fiscal policy slightly to counteract the deepening recession.
The fiscal responsibility which the Chancellor had to assume was forced upon him by the Government's own mistakes. The creation of the recession has led to the automatic stabilisers and to the return to deficit. That, together with the need to bale out the poll tax, conditioned the Chancellor's whole approach in his Budget.
There was an interesting phrase about the exchange rate mechanism in the Chancellor's speech:
The time has come to apply ourselves wholeheartedly to the task of making our membership a success.
I take that to mean that, up to that moment, the Government had not applied themselves wholeheartedly to the task of making a success of our membership of the exchange rate mechanism and that what the Chancellor said signifies a new approach. He followed that up by saying that at the moment he had no plans to move to a narrower band. I can only take that to be a signal that that is under more active consideration than before. I hope that that is what is intended.
Another interesting phrase appears on page 9 of the Red Book:
Interest rate convergence will follow inflation convergence. Both are likely to take some time to achieve.
However, that contrasts with what the Chancellor said yesterday:
The prospect, therefore, is that we will narrow the inflation gap with Europe remarkably quickly."—[Official Report, 19 March 1991; Vol. 188, cols. 165, 167.]
The Chancellor was saying in one breath that it will happen quickly, and in another that it will take some time to achieve. Only one of those statements can be true, unless they apply to totally different measures of inflation. Perhaps that can be clarified.
What the Chancellor said yesterday on inflation needs most of all to be qualified. He referred constantly to the forecast of 4 per cent. for headline inflation. It is not long since he as Chief Secretary, and his two predecessors as Chancellor, were lecturing us about how misleading the headline inflation figure is, and how vital it is to look at the underlying rate of inflation. I listened to all those lectures and was greatly moved by them. Perhaps I was influenced by their strictures to look more closely at the treatment of inflation.
I find that the GDP deflators set out in the Red Book show none of the wonderful improvements. They show that we will continue to have a high rate of underlying inflation. Even if we take account of the effect of that on


the introduction of the 2·5 per cent. extra VAT, it will still show a failure to converge with lower inflation rates in other parts of the European Community.
If we take some of the other indices, such as producer output price inflation, which is quite a good index of underlying inflation, we find much wishful thinking in the Red Book. Indeed, we find the statement:
This recent pick up in inflation is surprising.
Surely, after all these years, the Government are no longer surprised by the persistence of British inflation. It is worrying that they seem to grasp at the straw of 4 per cent. headline inflation and do not recognise the 7 per cent. underlying inflation rate which all their forecasts contain.
Figures that have been put before us in the debate and in the documents tell the story. Output is down by 5 per cent. and fixed investment is falling by 9·75 per cent. Those are alarming figures, particularly when set alongside the unemployment forecasts and the serious unemployment that we face.
The Government seem to think that, despite all that, productivity will rebound with the recovery in activity and that that will keep down unit labour costs. If the recovery is as slow as the Government forecast, how will productivity rebound? I suppose the Government would argue that it will do so because business will have a better climate as a result of the Budget measures.
How good is the Budget for business? Many of the tax changes, large and small, are welcome. Indeed, they follow closely the submissions which we made in the Liberal Democrat alternative budget, including the proposals for raising the VAT threshold, changing the VAT bad debt scheme and changing the VAT serious misdeclaration penalty scheme. The measures on corporation tax are welcome in principle but they are less effective in serving the purposes that I favour than the measures that we propose. The Government's measures will not stimulate investment.
I do not share the Labour party's view that it is possible to distinguish between manufacturing investment and other types of commercial investment. That understates the value of the services sector and the general tradeability of services. However, measures designed to encourage investment in general, such as indexation of depreciation allowances, might have been a better stimulus to industry than the proposed changes in corporation tax.
As I said to the Chief Secretary, when one adds up all the changes—the Government's estimate is that there are almost £1 billion-worth of tax reductions for industry, which it will take at face value—one must set that against the extra £2·2 billion that business will pay in uniform business rates in the coming year. That is an absolutely massive increase in liability for businesses both large and small. It will be felt particularly keenly by small businesses.
The fundamental problems for United Kingdom industry remain, against the background of the inadequacies of our education system and transport system. People have practical problems in simply getting to work by public transport, especially in London. There was no new investment in education or transport.
The tax relief for training does not address any of the serious problems that we face. It does not even begin until next year. It will help only a limited range of qualifications, and it will not add up to a tenth of what the Government have cut from the real training budget during the current

year. Investment in training, transport and education would all have been sensible measures to take at this stage, which would have justified some loosening of fiscal policy.
I welcome some of the measures in the Budget, including the tax easement for people who were hostages and prisoners in the early stages of the Gulf conflict and lost the benefit of the tax relief which they could have expected to receive for the year. I have pressed Ministers on that several times during parliamentary questions, and I am glad that the Chancellor has now conceded the point. It will give deserved relief to people who have gone through a terrible experience.
I also welcome the removal of top-rate mortgage interest relief. Again, we have pressed that measure on the Government for several years. We also welcome indexation of excise duties, closing the capital gains tax loophole, the Chancellor's increases in petrol duty and his rather incomplete measures on company cars. Those are all measures that we pressed on the Chancellor. However, in the case of company cars, he has been careful to ensure that only the employer's contribution will be affected, and not that of the employee.

Mr. Harry Ewing: May I take the hon. Gentleman back to his point about tax relief for people who were connected with Kuwait? Has not he misunderstood the Budget proposal? Will it not benefit people who were in Britain at the time of the outbreak of hostilities who could not return to Kuwait? The mere fact that they could not return meant that they were in Britain for more than 12 weeks and therefore did not qualify for exemption from tax. As they were here for more than 12 weeks, they were liable to pay tax. The Chancellor announced yesterday that the Government are waiving that liability to tax. It has nothing to do with those who were held hostage.

Mr. Beith: I do not know whether the category that the hon. Gentleman describes is included in the relief. I assumed from what the Chancellor said that he intended to benefit the people whose eligibility for tax relief was lost because they returned from the Gulf before the end of the tax year when they were released from being held hostage. The matter is a Finance Bill Committee point. We can consider it in detail in Committee. I hope that the hon. Gentleman will serve on that Committee. He can raise the point then.
I was listing some tax-raising measures which the Government were right to take. However, the trouble with the Government taking such measures—which we ourselves proposed—is that the compensating benefits have not been provided. The Government have raided tax-raising measures without spending the revenue where it should have been spent. They have increased the tax penalty on the use of a private motor car, but where is the improvement in public transport to enable people not to use their cars for essential journeys and journeys into city centres? Where is the improvement in rural public transport to compensate people in rural areas for the high cost of petrol when they have seen such a staggering decline in rural transport since bus deregulation? Investment in public transport should have been undertaken and paid for out of the gains in revenue. The purpose of taxes which are directed at the environment is not merely to raise revenue but to change the way in which we treat the environment.
There are several items missing from the Budget. Several measures that people expected were not taken. There is a large gap when it comes to green measures. I have already referred to measures on the motor car, but where were the measures referred to by the hon. Member for Saffron Walden (Mr. Haselhurst) on catalytic converters? Where were the pollution taxes hinted at in the Government's environment White Paper? When pressed on such taxes, the right hon. Member for Bath (Mr. Patten), who now chairs the Conservative party and was previously Secretary of State for the Environment, said that the Chancellor would be considering them. It seems that he is still considering them, because they were riot in the Budget this year.
Another trumpeted possibility that we pressed on the Government last year was wider tax relief for child care. That has not appeared in the Budget this year. Things have gone very quiet on that front, at a time when the Government were widely expected to give greater opportunities for women who want to do so to work, even where workplace nurseries are not available. Indeed, that facility is available to very few people.
The effect on charities of the 2·5 per cent. increase in VAT strengthens the case for more extensive relief for charities. Charities will face serious problems after the Budget.
This was a Budget to get the Government out of a mess of their own making, not to deal with the present and future problems of the United Kingdom economy. The measures in the Budget were the result of the rejection of the poll tax by the electors of Ribble Valley, of the inflation and the recession—which resulted from the credit boom that the Government stimulated—the failure to control inflation and of the failure to keep child benefit up to date. The Budget was a clean-up operation for the Government's failures. It is not sufficient to guide us safely out of recession.

Sir Ian Gilmour: The hon. Member for Berwick-upon-Tweed (Mr. Beith) made several cogent points to which I shall return later. First, I congratulate my right hon. Friend the Chancellor of the Exchequer on a thoroughly civilised as well as an astute Budget. My right hon. Friend the Member for Aylesbury (Sir T. Raison) and my hon. Friends the Members for Broxtowe (Mr. Lester) and for Hornchurch (Mr. Squire) and I and other hon. Members have vehemently opposed the Government's freezing of child benefit for several years past. So my right hon. Friend the Chancellor's assurance yesterday that those bad old days were over and that in future child benefit would be uprated with inflation was enormously welcome.
The increase in child benefit is equally welcome, although I am puzzled by the form that it took. When my right hon. Friend the Secretary of State for Social Security announced that he would not uprate in general but only for the eldest child, I pointed out that the only countries which gave more in child benefit or child allowances for the first child were Iran and Malta. I am puzzled as to what close affinities the Government find between Iran and Malta and our social system and customs. Such affinities do not immediately spring to mind. One would have thought that we had closer affinities with countries on the European continent, some of which differentiate between

children but give more to the third child. That has slightly more rationale because it is well known that the worst poverty is in families with large numbers of children. However, on the whole it is better to keep the rate uniform. Whether the change is illogical or not, what has been done is enormously welcome and the Chancellor's assurance is greatly valued.
I also welcome the Government's tolerance of running deficits and their intention to have a public sector borrowing requirement this year and next year. However, it may be rather larger than is predicted in the Red Book. Nevertheless, the firm realisation that Budgets can be balanced at best only over the medium term, leaving open how medium the term is and how long it will go on, seems an excellent idea.
Like the hon. Member for Berwick-upon-Tweed, I welcome what is being done by way of corporation tax and for small businesses. Having forgotten that there was a heavy extra burden on the uniform business rate, I take the hon. Gentleman's point. I welcome very much the fact that a great deal is being done, even if in a minor way, for businesses. I welcome also the uprating of tax on tobacco, alcohol and petrol. It seems to me that, in a possible—perhaps probable—election year, that is a thoroughly responsible thing to do. I regret very much the fact that the lottery that we had been rather led to expect will not be introduced. Help for the arts, sport and other good causes would have been very welcome.

Mr. William Ross: Football pools are now getting into the arts and sport on a very large scale and they are nothing but a lottery.

Sir Ian Gilmour: Football pools are indeed a lottery. I welcome also what is being done by the sports and arts trusts. However, as I understand it, the scale of benefit is very much smaller than would be provided by a national lottery. Although I welcome what is being done, I regret the fact that a national lottery will not be set up. I hope that that will be remedied next year.
Having been a heavy opponent of the poll tax from the word go, I welcome very much the fact that such a hefty chunk is being taken out of it. Of course, until we see what happens tomorrow, there is not much point in saying anything more about that. I am not wholly sure, however, that the Chancellor is wise to finance the reduction out of VAT. As other hon. Members have said, the headline rate of inflation will be improved, but the core rate will increase, and consumer spending, on which the Government greatly rely to get the country out of recession, may take a knock.
I come now to my main point. While fully recognising the great merits of the Chancellor's individual proposals, I am concerned about the strategic plan that must be presumed to underlie them. We have to consider where the economy is headed—not just in the short term, but for the next few years. The Chancellor, in his Budget speech, said that he expected output to grow by 2 per cent. during the year up to the end of the first half of next year, and that this should be followed by annual growth of more or less 3 per cent. That does not sound too bad; indeed, it sounds pretty good. However, it is worse than it appears. The forecast growth rate is little better than the long-run trend. Starting where we are now, there is no prospect, on the basis of the Chancellor's own showing, of any decline in


unemployment. The very sorry prospect is of unemployment hovering indefinitely around 2 million or 2·5 million. But will things be even as good as that?
It has now been accepted by the Treasury that a severe recession is under way. The Treasury, with characteristic honesty, has produced, in its Red Book, a table showing how last year's forecast of 1 per cent. growth in GDP in 1990 turned out to be a growth of only 0·5 per cent. The right hon. and learned Member for Monklands, East (Mr. Smith) said that this was a Government and Treasury technique to make things seem much better than they really were. He suggested that it was all rather dishonest. I only wish that it were a technique, but I acquit the Government and the Treasury of any such design. I am sure that they actually believed the forecast—and that is more worrying. I think that the Treasury has been wholly honest, but I wish that it had carried its honesty even further and emphasised the full scale of the revision that it has had to make. That can be done only by taking a slightly longer period than 1989–90.
In last year's Red Book, the Treasury forecast that, between 1988 and the first half of 1991, GDP would rise by 4·75 per cent., with manufacturing output rising by 5·5 per cent. The comparable figures for that period of two and a half years are now zero growth for GDP and minus 1·25 per cent. in the case of manufacturing output. These downward revisions mean that the level of GDP is now nearly 5 per cent. lower than was expected only a year ago, while in the case of manufacturing output there is a drop of nearly 7 per cent. That is a staggering discrepancy.
I am not making an abstruse, technical or academic point. When we, as laymen, give our support to the Chancellor for his Budget proposals, we are completely dependent on the accompanying economic forecast being approximately—if only very approximately—correct. The Chancellor himself must agree that his Budget proposals can be justified only if they are followed by events that bear some slight resemblance to what was forecast. There must be some point at which it would have to be conceded that events had taken a turn so different from what had been expected that the entire rationale of existing policies was destroyed.
We are not all that far from such a situation—certainly not as far as I would wish. Professor Wynne Godley, whose forecasting track record is probably second to none, forecasts in the New Statesman not a rise in output from now on, but a continued decline through 1992. Unfortunately, the Budget papers contain nothing that wholly convinces me that Professor Godley is wrong. Indeed, all that we need is a repeat performance from the Treasury forecasters to make his forecast come true. Another error of the same size as that of last year would mean that, after the drop of 2 per cent. in output in 1991, there would be not the expected rise of 2 per cent. in 1992, but a further fall of 3 per cent.—and unemployment would be rising towards 4 million rather than 3 million.
I hope that before the end of the debate Treasury Ministers will make good what is at present an unacceptable gap in the material that we have been offered. In other words, I should like to be told why things have turned out to be so much worse than was expected, so that we may have more confidence that, next time round, Treasury forecasts will prove to be right. The

weakest part of the Red Book is the short section devoted to recovery. I profoundly hope that the Treasury forecasts are correct at last and that my right hon. Friend the Chancellor can look forward to framing a number of successful and socially aware Budgets.

Mr. John Garrett: The backdrop to the Budget is a recession that is very deep indeed—precisely as the Opposition forecast. Indeed, last October, the Treasury Select Committee found that the economic indicators showed a profile of decline in economic activity in this country much the same as in the year 1980–81. Over the last year or so, Chancellors have said that this recession was not a recession; then that it would be shallow and short; then that it was deeper, but was only a ripple from the world trade cycle—as if it were something from the act of God department. In fact, it is a deep and dangerous, home-grown slump.
The fall in GDP this year is no less than 2 per cent., whereas the Treasury, in the autumn statement four months ago, forecast a rise of 0·5 per cent. This is a phenomenal level of error over a mere four months. These Treasury sources, whose forecasting record, as the right hon. Member for Chesham and Amersham said, is spectacularly worse than that of other bodies, let alone the Treasury Select Committee, now foresee a most tremendous turnround, taking us to a growth rate of 2 per cent. from this mid-summer to next mid-summer.
It would be interesting to know what the source of this turnround might be. I suppose that it could be restocking, or the end of destocking, by industry; but restocking is not what it used to be. As industry has become more efficient, it needs less in the inventory and in work in progress for a given level of output. Or there could be a spectacular rise in exports, but that does not seem to be forecast in the Red Book. After 25 years of reading Red Books, I have come to the conclusion that Treasury economic forecasts are a form of institutionalised leg pulling. The results never bear out the optimistic scenarios. As a member of the Select Committee on the Treasury and Civil Service off and on since the mid-1970s, I believe that the Committee needs alternative forecasting machinery of its own so that it can serve the House with more objective calculations. The Committee is well served by its advisers but it needs an analytical staff to provide an alternative view to the nonsense with which we have been presented by the Treasury on the public sector borrowing requirement, trade, employment, inflation and monetary volumes, at least over the past few years.
It is clear that, in this recession, the economy will decline by the greatest amount in one year since 1980. We are seeing a stream of business failures, the collapse of corporate profits and dividends, and rapidly rising unemployment. As the right hon. Member for Chesham and Amersham said, it is difficult to believe the Government's figures for the PSBR in the coming financial year at a time of such deep recession. It seems that the £8 billion that appears in the Red Book will be £10 billion or £12 billion, and that it will be a greater sum in the following year.
It is clear that, unless the Government fiddle the unemployment figures for the 30th time in a decade, unemployment will reach, and probably exceed, 2·5 million this year. All that is coupled with a cut in training


places. We should spend on training during a recession so that we have a skilled work force ready for the upturn. My constituents are being turned away from training courses because resources for training are being cut. In Norwich, scarcely a week goes by without redundancies in the food, footwear, engineering and construction industries. The retailing and construction industries in East Anglia have come to a full stop. They are important engines of growth and economic development in such a region. The increase in value added tax will hit both industries.
Consumer spending in 1991 was forecast in the autumn statement—we are back to Treasury forecasts again—to increase by 1·75 per cent. Instead, it will fall by 1·75 per cent. Imagine the impact that that will have on the retail trade. Manufacturing output will fall be 5 per cent. in 1991, which will take it to roughly where it was in 1979. So much for the decade of the enterprise economy.
It is said that this is a Budget for business, but that does not bear too close an examination. We are told in the Red Book that corporation tax will be reduced by about £1 billion, but company national insurance contributions will rise by over £600 million. As the hon. Member for Berwick-upon-Tweed (Mr. Beith) said, paragraph 1·2 on page 7 of the Red Book tells us that rates—mostly the uniform business rate—will rise by £2·2 billion in one year. When challenged on that, the Financial Secretary to the Treasury said that at least the UBR gave us continuity. I do not know what sort of continuity it is when we read that there will be an increase of £2·2 billion in rates as a result of the impost on businesses.
Part of the miraculous upturn in mid-1991 derives from an even more miraculous improvement in unit labour costs at the same time. Chart 3·11, which appears on page 30 of the Red Book, shows British labour costs falling from an annual increase of 10 per cent. in early 1990 to 3 per cent. or 4 per cent. in mid-1992. The graph is unbelievable. It seems that our relative labour costs rise, only to fall off a cliff, as it were, in 1991. At that stage they join—surprise, surprise—or converge with the rate of change in unit labour costs in the 16 major industrial countries.
After we have experienced greater wage inflation than other countries, there is suddenly to be an improvement within a few months. In other words, there will be a huge increase in labour productivity that will be associated with a vast decline in investment. The Financial Secretary's answer to my intervention on that issue seemed to be merely a smokescreen. The effect of past "investment" cannot produce that level of productivity increase, given that companies have been disinvesting on a large scale. The Government's assertions strain belief.
I welcome the green tinges in the Budget, including the price that will be charged for unleaded petrol and the provisions that bear on company cars, but the effect on energy efficiency will be perverse. The increase in the rate of VAT will lead to an increase in the cost of making home improvements, such as better insulation and double glazing. That will hit the small builder substantially and reduce energy saving, an area in which our national record is extremely poor. Indeed, in the past two years investment in energy-saving measures in buildings has fallen by 28 per cent.
There was an opportunity to use taxation or, failing that, Government grants as a way of encouraging home insulation, the fitting of double glazing and home improvements generally. If that opportunity had been

taken, a boost would have been given to the small builder, while energy bills would have been reduced. It seems that a substantial opportunity has been lost.
I welcome the increase in child benefit, but the 25p increase for children other than the first is derisory. I suppose that the increase will provide for a pair of shoelaces. One constant problem for poorer families is the tax burden that falls on the low-paid because of the lack of progression in our tax system, which has only two income tax levels. All other European countries have far more sensitively graduated steps for the entry into paying income tax so that the taxation levels are much more progressive and much more sensitive to circumstances. In not changing our system of tax thresholds the Chancellor of the Exchequer missed an opportunity to relieve family poverty.
The Budget will do little for industry, jobs, the environment or the family. It produced great theatre at the very end of the statement, but it was largely irrelevant to our economy.

Mr. Toby Jessel: My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) and the hon. Member for Wallsend (Mr. Garrett) referred to economic forecasters——

Mr. John Garrett: I represent Norwich, South.

Mr. Jessel: I apologise to the hon. Gentleman. Both he and my right hon. Friend placed some reliance on the accuracy of various economic forecasters. That is entirely wrong. Economic forecasters are about as reliable as old-fashioned weather forecasters. They never project with any precision what the state of the economy will be. The condition of the economy will depend on many variable factors, such as changes in the confidence of business entrepreneurs. Those changes will have an effect on their investment decisions. Other changes are dependent on international fluctuations in currencies or other economic factors. A modest upturn or downturn in economic activity, when contrasted with the predictions of economic forecasters, will make a relatively considerable difference in the Government's tax yield, and an exaggerated difference in the public sector borrowing requirement. All experience shows that economic forecasters are most unreliable and that we should place no reliance upon them.
Much the most important thing is to ensure that we get the economy right by reducing inflation, reducing interest rates and introducing steady growth in the economy. Although those objectives cannot be achieved at once, I believe that the policies that are set out in the Budget statement are the right ones to bring them about. They will be achieved safely and reliably without giving another twist to the inflationary spiral by the implementation of the proposals that my right hon. Friend the Chancellor of the Exchequer set out. Only when we reduce inflation can we safely reduce interest rates.
I warmly congratulate my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), the Chancellor of the Exchequer, who is my constituency neighbour. I should be grateful to the Financial Secretary to the Treasury if he would be kind enough to convey my feelings to my right hon. Friend.
I commend the 15p increase——

Mr. John Garrett: Is the hon. Gentleman sure that he has referred to the right constituency?

Mr. Jessel: I have a very good constituency, thank you.
I commend the 15p increase in the tax on cigarettes. A direct relationship has been established between the smoking of cigarettes and the incidence of lung cancer, bronchitis and coronary heart disease. There was a disturbing increase in smoking by young people, especially young girls, in the second half of the 1980s. The increase in tax will make them think twice. It is entirely right and proper to use the Budget, and thereafter the Finance Bill, consistent with economic policy, to promote health. I am glad that the Chancellor has proposed it and I hope that he does it again next year.
I was delighted by the cut in community charge of £140 per person. In Twickenham, this will mean that the community charge goes down from £419 to £279. It takes some of the sting out of the community charge. I believe that most people will hardly notice the corresponding increase of 2·5 per cent. in value added tax.

Mr. Ted Leadbitter: I hope to speak later on this subject. When the hon. Member for Twickenham (Mr. Jessel) is dealing with the 2·5 per cent. increase in value added tax, instead of invoking the phrase that the more those who are richer spend, the more they contribute, will he address himself to the facts? It is the proportion of the income that is spent on goods with value added tax which matters. The proportion is greater for low-income workers than for richer people.

Mr. Jessel: I respect the sincerity of the hon. Member for Hartlepool (Mr. Leadbitter), but I think that he is talking nonsense, because value added tax is not charged on the basic essentials of life—food; housing, whether by way of rent or mortgage; fuel, whether coal, electricity, gas or oil; or fares, whether on buses, trains or planes. There are a few items such as books and newspapers on which it is not currently charged, but those are the main items, and they make up a much larger proportion of the family budget of the poorest families than of the better-off families.

Mr. Leadbitter: The hon. Member appears to be wanting a fight, but all zero taxes affect the rich as well as the poor. The hon. Member for Hartlepool is not referring to zero taxes; I am referring to those value added taxes that everyone, whatever their income, must invoke. The proportion of that for people on low incomes is bound to be higher than that for people with bigger incomes.

Mr. Jessel: It is not bound to be so, and I have just explained why. Poorer families spend a larger proportion of their income on those basic essentials and the richer families tend to spend a larger proportion of their income on items on which value added tax is charged. Furthermore, the 2·5 per cent. increase in value added tax is not 2·5 on 100; there is already a 15 per cent. value added tax, so it is 2·5 per cent. on 115, and that is an increase of only just over 2 per cent. Once one has allowed for the fact that something like half the budget of the average family goes on essentials, however, the figure reduces to a little over 1 per cent. on the budget of a family—perhaps between 1 per cent. and 1·5 per cent.—and against that must be offset the reduction of £140 in the community charge.
That is why, at a time of falling inflation and soon, I hope, falling interest rates, I believe that I was right to say a couple of minutes ago that the 2·5 per cent. increase in value added tax will hardly be noticed.

Mr. Matthew Carrington: My hon. Friend the Member for Twickenham is absolutely right. A family on average income whose community charge was reduced by £140 would have to spend more than £5,500 on items on which VAT is payable to spend the equivalent in additional VAT. Does my hon. Friend agree that that represents about half the national average income? In other words, someone on average income will almost certainly be better off by the reduction in community charge than worse off by the increase in value added tax.

Mr. Jessel: My hon. Friend the Member for Fulham (Mr. Carrington) is absolutely right.
I return to what my right hon. Friend the Chancellor of the Exchequer said in his Budget speech about inflation:
We must get inflation down, and this time we must keep it down. The overriding lesson of the past few years is that the battle against inflation is never won.
He went on to outline the evils of inflation and how they affect ordinary families.
I hope, however, that my hon. Friend the Financial Secretary to the Treasury will enlarge on what the Chancellor meant when he said that local authorities should play a part in the battle against inflation and that when community charges were to be reduced in the coming year
the money will not be available to increase local authority spending."—[Official Report, 19 March 1991; Vol. 188, c. 166, 180.]
This is very important because it is vital to get inflation down, and local authority spending is not always helpful in the battle to control inflation. Here, if my hon. Friend the Member for Fulham will allow me, I refer to an advertisement in The Guardian on 27 February for the appointment of a chief executive for the London borough of Hammersmith and Fulham at a salary of £78,000. The advertisement was headed "Facing the Future" and part of its text read:
We can offer you a negotiable salary of c. £78,000 plus a car and benefits package. Not to mention the satisfaction that comes from making a personal impact on the future of local government.
That negotiable salary of £78,000 should be contrasted with the top pay unit's monthly review of salaries and benefits for chief officers of local authorities of England and Wales. For the London boroughs and metropolitan districts with populations of up to 300,000, the maximum recommended amount was £50,600. It also compares with the current salary of a full admiral, a full general or an air chief marshal of £77,000, or the £59,000 salary of a Cabinet Minister with responsibility for running an entire Government Department.
This is getting out of hand and we must do more to stop it. It is a very serious matter in the battle to restrain inflation. It tends to have a knock-on effect on the salaries of chief officers of other local authorities and on the economy as a whole. I hope that the Public Accounts Committee will look at it. We must get a better grip on this particular part of public spending, and I hope that the Government will have more to say on how it can be done.

Mr. Kenneth Hind: In the same issue of The Sunday Times——

Mr. Jessel: It was in The Guardian.

Mr. Hind: If my hon. Friend had looked at The Sunday Times of the same week, he would have found that Hackney was also advertising for a chief executive at or about the same salary, as were Hammersmith and Fulham and one or two other Labour authorities. It is perhaps an indication of the difficulties of obtaining a chief executive of any ability who is prepared to undertake the running of an authority controlled by Labour, with all the rough and tumble and the likely breaking of the law that often takes place in certain cases. It has to do with market Forces rather than the type of work.

Mr. Jessel: My hon. Friend the Member for Lancashire, West (Mr. Hind) is entirely right, but this type of extravagance is not confined to Labour local authorities.

Mr. Boateng: rose——

Mr. Jessel: Liberal authorities such as Richmond upon Thames borough council are also sometimes extravagant. That council has in the past three years constructed a new town hall costing £11 million.

Mr. Boateng: How many chief executives did Lady Porter get through?

Mr. Jessel: I have not the slightest idea, but I bet that she did not pay them £78,000 a year.

Mr. Boateng: How much did she sell the drains for?

Mr. Jessel: That goes beyond the scope of this debate, and is nothing to do with the Budget and inflation control.

Mr. Carrington: Will my hon. Friend also reflect that the fact that Hammersmith and Fulham council spends such a lot on its chief executive may be in direct proportion to the £6 billion that it gambled on the money markets?

Mr. Jessel: That is relevant because, by any standards, £6 billion has an effect on the national economy.
The arts and heritage bring enormous benefits to the British economy. Theatres, concerts, opera, ballet, museums, art galleries and historic houses have a total turnover of more than £5 billion. More people in Britain go to the theatre than to football matches. The arts not only enhance the quality of life of the British people, but draw to our shores visitors who spend not only on the arts and heritage, but on hotels, restaurants, shopping and internal travel, all of which generate income, employment and foreign exchange. It is true that during the Gulf war traffic across the Atlantic to this country diminished, but it has begun to pick up again. Those overseas visitors, whether from other continents or Europe, come here not for our weather, but to see our arts, countryside and heritage.
My right hon. Friend the Minister for the Arts is strongly positive in his support and encouragement. The Treasury team that he has to consult has a history which suggests that they are likely to support the arts. The Prime Minister is also First Lord of the Treasury; when he was Chancellor of the Exchequer he sanctioned increases in the Arts Council budget, well above the inflation rate, in the two successive autumn statements of 1989 and 1990. Those decisions were shared by the present Chancellor of the Exchequer when he was Chief Secretary to the Treasury and by the present Prime Minister when he was

Chancellor. The present Chancellor of the Exchequer was once a Parliamentary Private Secretary to the former Minister for the Arts, Lord St. John. The present Chief Secretary to the Treasury is a former Minister for the Arts, a job for which his enthusiasm was obvious in the short time in which he held the position.
I shall make two fiscal points relating to the arts. The first deals with the proposal for a national lottery for arts and sports. I wish that yesterday my right hon. Friend the Chancellor could have gone further than he did when he announced a scheme for a national arts and sports trust, which would raise £60 million a year. That is a substantial sum, but in an Adjournment debate last Thursday introduced by my hon. Friend the Member for Hyndburn (Mr. Hargreaves), my hon. Friend the Member for Basildon (Mr. Amess) said that if the figures for national lotteries in practically every continental country were extrapolated to the United Kingdom, the turnover would be £3 billion a year and the profit available for arts and sports, after expenses, administration and the distribution of prizes, would be about £1 billion a year. That is 15 or 17 times as much as the £60 million which the Chancellor of the Exchequer mentioned in relation to the other scheme. I hope that what was proposed yesterday will be no more than a stepping stone towards a national lottery, which I hope will come because it could do a massive amount of good for the sports and arts.
I now turn to the tax position of actors and actresses, and declare an interest as my wife is a singer and actress. In the pursuit of their profession, actors and actresses are not allowed to offset against income, for tax purposes, anything other than agents' fees. Actors and actresses often have to bear the cost of lodgings when they appear in performances away from home. They also have an abnormal number of auditions because of their separate appearances in different shows. Those are obviously much more frequent than the job interviews of people in different occupations. All those professional costs should come under schedule D so that they can be offset. I do not believe that it is enough to offset merely agents' fees. I hope that the Government will consult British Equity, the actors' union, and take another look at the matter because I believe that it would help the theatre industry, which is so important for tourism and for bringing visitors from overseas to the United Kingdom.

Mr. William Ross: I shall not venture too far into the arguments of the hon. Member for Twickenham (Mr. Jessel); nor do I wish to get involved in the quarrels about councils in Great Britain—we have enough problems at home. However, I say to the hon. Member that, if one third of the profits of a national lottery went to the arts, the punters would not come out of it well. I should have thought that those who invested their hard-earned cash in such a lottery would want a better return than that scheme would apparently give them.
Yesterday, I listened to the right hon. Member for Plymouth, Devonport (Dr. Owen), who said that he had just listened to the first social market budget. A friend of mine is reputed to have said that, whenever the term "social" is used before the word "market", it means that the market will be negated by the adjective.
I was gratified when the Chancellor, in his opening remarks, said that he was committed to at least one of the


virtues underlying the Thatcher years, in that his central economic aim was to bring down inflation and keep it down. It is nice to turn the circle every 10 years or so, but I wish that the Government had managed to do so the first time.
I have been here long enough to know that not everything said by a Chancellor in a Budget speech is necessarily accurate, any more than autumn statements are. Certainly, Chancellors have not got it all that right lately. Some hon. Members have already belaboured the Treasury's forecast team; time will prove the accuracy of its forecasts and let us see, as events unfold, just what has been known and left unsaid.
I have a number of concerns about the economy and what we heard in the Budget yesterday. In a sense, we heard two Budget speeches yesterday—one was the normal Budget speech and the other related solely to the money that is to be put into local government. I shall begin where the Chancellor finished: with the £4·5 billion, which will have vast consequences for all parties in the House and in the country that fight elections, and for the future of local government—its structure, functions and finance. Anyone who thinks that it will not lives in a dream world.
Unless the Bill to be presented is carefully designed, we shall get into even deeper difficulties. The Bill will deal only with the first step in a much larger reorganisation of local government. We see here the abandonment of the principle of the direct link between those who pay local government taxation and those who spend it, the councils.
I am concerned about that, because we are moving too far away from the principle of accountability, which the community charge tried to address, perhaps not successfully. But that issue will remain with us. If we reach the stage when accountability disappears, local government as we have known it in this country for a long period will be utterly swept away—there is no escape from that conclusion.
We in the Ulster Unionist party believe that everyone should pay something towards the cost of local government. Therefore, the Bill that we shall see tomorrow is of great importance. We had two basic objections to the community charge. One was that Northern Ireland was not treated in exactly the same way as the rest of the United Kingdom—a problem that we have always had. Our other objection was more serious in its application—that we were simply replacing one crude tax with another. Local government taxation needs a wider tax base. The revenue that local government collects in other countries, especially in America, is specific to the functions that local government bodies perform.
I must disagree with the hon. Member for Twickenham (Mr. Jessel) who said that the 2·5 per cent. increase in VAT would work out at only 2 per cent. I am sorry, but we are moving from a VAT rate of 15 per cent. to one of 17·5 per cent. That is my understanding and I am sure that those on the Treasury Bench will agree with me rather than with the hon. Gentleman. That 2·5 per cent. is important.
We may have to wait until tomorrow to find out, but I would like to know whether that 2·5 per cent.—that widening of the tax base to which I have no great objection if it is done properly—will be specific to one level of local government or to a specific function of local government. If so, we are going down a sensible road. If not, we are

simply throwing money at the problem of local government finance. Doing that in such a panic-stricken atmosphere will eventually put us in an even worse hole than we are in with the community charge which many hon. Members seem to forget was introduced because of the panic-stricken state of the Conservative party in Scotland as a result of the revaluation there.
In the political arguments between parties in the House, hon. Members seem to forget the root causes of the problems of local government finance, which are very real and which would not go away even if the rates were restored. Because we in Northern Ireland have been able to stand back, we have taken a more jaundiced but perhaps more accurate view of the real difficulties of the Government and the difficulties which any Government would face in trying to put local government on a sound basis, where people see their money spent and know what it is spent on, and so hold their councils responsible for its spending.
We do not believe that the fire service, the police or education, to name but three of the functions of local government, should be completely under Government control. That would be a wrong step. The more money is put into local government by the Government, the more the Government's hand will control every aspect of it. That is inherently wrong. We must create a system of local government with proper financing which not only works but which commands a consensus across the House.
Looking at local government in Great Britain from the perspective of Northern Ireland, we see councils fighting a national battle when they should be getting on with administering efficiently their local government functions, which, far too often, does not happen. The hon. Member for Twickenham touched on some cases where money was literally being thrown away in local government. That is the impression that I as an outsider get, and I think that it is an impression shared by many in the community outside. We must seek a consensus which works even if there is a political battle in the House to get it. The sooner we start getting such a consensus, the better.
It would be false to believe that to do away with one tier of local government would result in a better service. I do not believe that the three services that I have just mentioned can be dealt with at district council level. A wider geographical area with perhaps a rather larger population than is contained in a district is needed if they are to be provided efficiently. If we do away with a tier and have only single-tier local councils, there will be great difficulties in the future. There is a real need to maintain a two-tier structure in future in local government, and I hope that the Government will not lightly abandon that. If they do, they will be straight back into another and possibly even deeper boghole.
Another question to which I would like an answer tonight concerns the application of the 2·5 per cent. VAT increase in Northern Ireland. Enough has already been said in exchanges across the House this afternoon to show that it will not receive universal acclaim or affection, but I am curious about what will happen to rates bills in Northern Ireland in the coming financial year as a result of that 2·5 per cent. VAT increase. How will the electorate in Northern Ireland who are paying the rates bill—a very different tax from the community charge—receive the average £140 per head rebate? That is a question which


everyone in Northern Ireland would like answered and answered soon. But perhaps the Government have not yet worked that out.
I am sure that before the debate is finished we will hear more about these matters, not least about the effect of VAT on low-income families where it will have a different impact. Both the hon. Members for Twickenham and for Hartlepool (Mr. Leadbitter), who took part in an argument across the Floor of the House a few minutes ago, had a lot going for them. That concerns the nuts and bolts of the tax, which I would like to see explored more deeply.
There is, as I have said. already far too much central control of council work. Hon. Members from all parties would desire less. But if there is to be less, some of the councils will have to show a sight more responsibiity, and perhaps party leaders will have to impose more responsibility on them right across the board. Some of the behaviour that we have witnessed is not good for Britain, for democracy or for the people on the ground.
Unfortunately, Thursday's Bill will be rammed through. I hope that when it is being rammed through all hon. Members will have a glimmering of the anger that we in Northern Ireland feel at the Order in Council procedure which is used for changing the law in Northern Ireland. The statement made by the Secretary of State for Northern Ireland today was another vivid illustration of that. The Government do not dare to bring before the House a Bill to privatise Northern Ireland Electricity.
But the Bill on Thursday will not be the end of the local government argument. It simply means that one method of financing local government is being changed, or perhaps only modified. Far ranging changes will still be needed and any changes to the financing of local government will also affect its structure and functions.
We have a long way to go. I hope to take some part in future debates to explore the matter more deeply. We in Northern Ireland would like to see a common system of local government throughout the United Kingdom, even if there is some variation from jurisdiction to jurisdiction. We would like to see a system which is recognisable from one end of the kingdom to the other.
The measures that were announced for business were welcome and they will help. but when the nuts and bolts are examined, business will not be universally content because in one way or another considerable burdens are being placed upon it. I hope that by the end of this debate the Chancellor and his colleagues on the Treasury Bench will have heard a fair number of well founded criticisms of their proposals.
Unfortunately, we were told nothing about interest rates yesterday. They are the greatest burden that business has to bear at present. The sooner that interest rates come down and stay down the better, but that is tied to inflation, and we do not want negative interest rates again. Across the board, the business community is hoping for an early and a fairly large cut in interest rates but I appreciate—and I hope that all those who cried out for entry into the ERM appreciate—that the Government lost an enormous amount of freedom of action on entry and cannot make the cuts in interest rates that they would have been able to make a year ago.
Business, especially manufacturing, needs more investment. Investment is falling and I should like to think that it will rise rapidly and soon. I agree with those hon. Members who have said that manufacturing industry is the source of a nation's wealth. Although service industries

provide jobs, they do not provide national wealth in the way that manufacturing does. The more encouragement that is given to manufacturing the better, and I regret that more incentives to invest are not given in the Budget.
I also regret that the inventor seems to be overlooked. We must do more for the fellow in the back shed who is up to something. Even in these days when huge sums are spent on research and development, individual inventors still come up with a nice idea which will provide 40 or 50 jobs when it gets to the market. Getting to the market is not simple, cheap or easy. Often inventors do not want to let go of their investment as it is the only chance that they have to make a few quid. We should be doing something to help them with the cost of patents, which can be a considerable cost to the individual.
We should also help with development costs. I am always telling the Secretary of State for Northern Ireland that, even if some of the money were lost, it would be far better to spend money on our own people than on some fellow with a big hat and a Texas drawl, who usually collects a few million and heads back to Texas again. I would prefer a few million pounds to be lost every year on promoting our own home-grown inventors than to hand millions to overseas people who only come here to try to defraud the Government and the country.
I also note that the increase in value added tax may well affect the capacity of some firms to pay money to charities. The VAT increase may not be universally acceptable to charitable organisations.
I noted with regret that the Chancellor once more praised entry into the exchange rate mechanism as a secure framework against inflation and said that we needed the discipline of the ERM. I always thought that that discipline was inherent in the claim that Anyman made whenever he was asking folk to vote for him. I always thought that people elected Governments to exercise discipline in financial matters. I point out to Ministers that the Germans did not need ERM to succeed after the war: all they needed was financial discipline. It could well be said that such discipline was imposed by the Bundesbank. I wonder why other Governments have not exercised the same discipline since the war. All it takes is the guts to do what is right when the right moment comes and not to bend with every passing wind.
If Governments accepted and imposed that discipline we would not have needed the ERM and we would have the freedom of action to change interest rates whenever it suited us. That might have been useful to the Conservative party at the present time.
In election after election the Conservative party has attacked the Labour party for not exercising financial discipline. Now we are told that the Conservative party needs someone else to prop it up in that financial discipline. It is a sad failing and a fall from the high standards which their predecessors employed.
I hope that the forecast that inflation will be down to 4 per cent. within a year is correct. Those of us who study past forecasts will not be as sure that it will happen as the Government Front Bench is. Considering that we have repaid £26 billion of our national debt during the past few years, which is a vast and welcome change from the rake's progress which characterised financial behaviour for many decades, I cannot but listen with dismay to the prophecy that there will be a minimum £8 billion deficit next year, and possibly a good deal more. We are told that it may be much larger the year after.
What really stuck in my gullet was the fact that the excuse given was that it was merely because of our place in the business cycle. If one can make that excuse for debts, will it also be applied to the £26 billion in repayments? How can one say that a deficit is a result of the cycle and in the same breath not have to admit that the repayments are a result of the cycle? I do not think that they are altogether the result of a cycle; they are the result of good management or mismanagement. I do not look with any pleasure upon the return of a deficit to Government finances.
The Chancellor said that failure in generations past has put a burden upon us and that, if we do not get back to a balanced budget, we will put a burden on future generations. That is a paraphrase but is basically the meaning of his words. However, yesterday he did not say that he was hoping to get back to a state of affairs where he could make repayments. He was merely looking for balanced budgets in the medium term. Therefore, one must accept that there has been a massive departure from the position for a few happy years when public sector debt was repaid.
I hope that it will dawn upon Ministers that many people in this country would like the public sector debt to be eliminated eventually, or at least reduced to a much lower level than at present. I am talking not about the percentage of gross national product but of a real decrease in cash terms in what we owe to the rest of the world.
As far as the taxation changes are concerned, I am disappointed that the fuel tax has risen so much because it increases the problems for rural dwellers, raises transport costs and is inherently inflationary in some respects. If the Government had decided to do that, why did they not go the whole hog? Why did they not simply replace the road fund licence while they were at it? That would have meant that everyone paid and there would not be so many tax dodgers floating around.
The tobacco tax increase, which has been so widely welcomed, will not be so widely welcomed in areas of the country where there is a tobacco industry. Tobacco is dangerous and I do not smoke myself—thank God, I never have. However, that increase will cost quite a lot of jobs in Ulster and will not necessarily stop people smoking. It might mean that we suck in imports of a lower quality and thus do more damage to people than any apparent good that may come about. The increase, which is above the level of inflation, was unwise at this time.
The mortgage interest relief changes may have only a minor effect upon house prices and may stop them taking off again. I certainly hope that that is the case, but I am curious as to whether it signals a slow shift from the special treatment of mortgages for housing purchase, which has been the case for many years, towards treating them like any other capital investment.
Other changes to be welcomed are those to capital gains tax and inheritance tax. Given the drop in the price of agricultural land, we are getting to a stage where most working farmers—rather than large estate owners—will not have to worry much about insuring themselves against inheritance tax because their farms will soon be well below the limit.
Child benefit has been considered time and time again as a means of helping families with children and it is

probably still the best way to do so. The Chancellor said yesterday that, while he had considered child tax allowances, he had come down against them. Because of the changes made, I think that child benefit will be with us for the foreseeable future, and we should try to ensure that all mothers get the benefit of that money.
Yesterday, there was no mention of privatisation income. I have had a quick glance through the Red Book, and I cannot find it there either. I wonder how much money we shall get from Northern Ireland Electricity? Frankly, I hope that the Government's efforts to put that legislation through the House fail, although, sadly, I fear that they will not. There simply cannot be privatisation and competition in the Northern Ireland context. We were in effect told today that one large power station would supply far more electricity than the Province needs, so how on earth can there be privatisation if we are to get into that state? And that is bound to come, because the existing plant is wearing out.
One of the two Budgets is a thing of bits and pieces, many of which we welcome and some of which will have unforeseen consequences. The other contains a massive change to the system of local government finance. The effects of the first are quantifiable, but experience suggests that those of the second cannot be reduced so easily to common sense and specific figures.
Once again, battle is joined over the financing, powers and structure of local government, and I think that that battle will continue for a long time. We are entering an unknown minefield, and, if we are not careful, the whole system of local government as we know it will be swept away. That will harm the country, local government and the people who live in the areas concerned, and, ultimately, will cost far more. We should not dare to bring such matters under the control of central Government. We must search assiduously for an acceptable means of financing local government that will keep it in sensible hands within the community.

Sir Alan Glyn: I agree with the hon. Member for Londonderry, East (Mr. Ross) that the Bill which will be presented tomorrow will by no means complete the process that is required for reform of local government—it needs a thorough overhaul. It must also be accountable. As my hon. Friend the Member for Twickenham (Mr. Jesse!) said, offering enormous salaries to chief executives does not promote accountability and has a detrimental effect on other authorities.
I congratulate the Government on producing such a sane and sensible Budget in the present circumstances. For one thing, the Budget will provide encouragement for small and large businesses. As the hon. Member for Londonderry, East observed, it is important that our industries should be helped to build themselves up to be able to compete with those of our European partners. I think that that is what the hon. Gentleman meant—and I see that he is nodding his agreement.
This country recognises that savings, too, should be encouraged, and I am glad to see that the Government also accept the importance of that. I am not talking about personal equity plans or the tax-exempt special savings account; I am talking about the accumulation of wealth by all sections of the community—not just the top section—to provide them with reserves to fall back on and a base


for their retirement. The encouragement of such savings, like the encouragement of home ownership, is Conservative party policy.
I hate the way in which managing directors are given enormous freedom to purchase shares in their companies while the workers are denied it. My right hon. Friend the Chancellor is right to want to ensure that the same facilities are offered, in a smaller way, to workers who, having become shareholders, will become more interested and involved in the work of their company. The widening of share ownership serves two purposes: it builds up a capitalist society among all classes, and it gives the workers an interest in the work that they are doing with their own hands.
I note that special provision has been made for those—married women in particular—who wish to use their initiative and train for an occupation that will be of use to the country in the future. I also welcome the help that has been given to charities.
I want to say something about local government, because what was said by the right hon. and learned Member for Monklands, East (Mr. Smith) has somehow been incorporated into the Budget. I think that the Government were right to raise VAT by 2·5 per cent., but I am not sure that I like the idea of that becoming permanent. Hon. Members have mentioned a property tax. Having spent 20 years on the rating and valuation tribunal in London, I find it terribly difficult to value houses. It is almost impossible. One house may be given a completely different valuation from the one next to it. Linking valuations with a property tax will mean an enormous undertaking if we are to get the tax right, and it will be as unfair as the present system.
Of course, successive Governments were wrong not to increase rateable values. That, indeed, gave rise to the poll tax, which was the only alternative to a property tax that the present Government could see. I disagree with the hon. Member for Londonderry, East—I think that the fire, police and education services should be financed directly by the Exchequer. After all, the Exchequer pays a considerable sum to local government—about 48 per cent. It is not all raised through local rates. Financing those services centrally would merely mean that the Exchequer would contribute a little more.
Although central Government provides local government with money—and is to provide more—local authorities must be made far more accountable. Councils should be run not by officers, but by elected members. The hon. Member for Londonderry, East is right to say that a complete reappraisal of the local government system is needed.
I was pleased to learn of the help that the Government will give to seamen. It may seem a small point, but such help is important to the Merchant Navy, which is declining. We want British sailors on board those ships, and we welcome the concessions that have been given to them. The same applies to those employed in the Gulf, who, through no fault of their own, were forced to leave because of the war and have been heavily penalised fiscally. No doubt the Ministry of Defence had a word in my right hon. Friend the Chancellor's ear. The tax on alcohol and tobacco strikes me as reasonable. After all, they are luxuries.
I have always advocated a move from direct to indirect taxation. Tomorrow's Bill is part of that, but I should like

more to be done in that regard. Other countries in Europe operate such systems, and run their affairs very successfully.
I welcome this excellent Budget, and congratulate my right hon. Friend the Chancellor on it.

Mr. Harry Ewing: If the hon. Member for Windsor and Maidenhead (Sir A. Glyn) will forgive me, I shall not take up all the points that he made. I shall deal with one later—the question of local government. First, I want to deal directly with his point about savings.
I am the first to agree that savings are very important to the country and its citizens. Tragically, however, one of the results of the Government's 12-year tenure is that savings have reached their lowest-ever level as a percentage of net disposable income. Despite the various incentive schemes introduced in last year's Budget, savings still have not taken off. After the introduction of those incentive schemes—building societies would be the first to tell us this—people merely transferred money that they had already invested from one savings account to the greater tax-incentive savings account. The tragic truth is that, as a percentage of net disposable income, savings are at their lowest level ever.
Over the past 12 months we have seen a traumatic recession and we have still not reached the depths of it. We have seen a dramatic increase in unemployment, which is beginning to accelerate. We have also seen some spectacular business collapses. If anyone had told the people of Glasgow or the west of Scotland that the massive Lewis's department store in Argyll street would go bankrupt in 1991, they would not have believed it, and nor would the people of Manchester and the other cities in which that store was located. It was an institution in those cities. We have seen the recent spectacular collapse of the International Leisure Group and Air Europe. We have seen an increase in inflation, which we have also seen begin to decrease.
Against that backdrop, the Government have failed at every by-election to hold some of the safest Conservative seats. The Liberal Democrats won Eastbourne and Ribble Valley and that is matched by the fact that the Labour party won Mid-Staffordshire with an equally massive swing. Sometimes I think that the Labour party does not give itself credit for the stupendous victory of my hon. Friend the Member for Mid-Staffordshire (Mrs. Heal).
There is a feeling—my hon. Friend the Member for Copeland (Dr. Cunningham) spoke on television about Ribble Valley—that those seats will revert to the Conservative party at the next election. I part company with my hon. Friend because the electorate are giving a great deal of thought to the way in which they will cast their vote. Political parties will, at their peril, take for granted the view that those seats will return to what is loosely described as their natural home at the general election. I do not believe that, but it remains to be seen whether my analysis is correct.
I wondered where the Budget had come from. As I listened to the Chancellor introducing his Budget, I realised that it was not the Government's Budget. In fact, the Chief Secretary told us today where it came from. He said that the Confederation of British Industry announced last night that the Budget contained every proposal that it had made to the Treasury. He also said that the Institute


of Directors announced last night that the Budget contained every proposal that it had made to the Chancellor. The Chief Secretary also told us that the Association of British Chambers of Commerce had announced that the Budget contained its proposals. The spokesman for the Liberal Democrats, the hon. Member for Berwick-upon-Tweed (Mr. Beith), said that the Budget contained everything that his party had suggested to the Government. Where was the Government's input? It is fairly obvious that the Budget was a hotch potch, put together against the backdrop of the panic of the past year and the prospect of a general election.
I welcome some aspects of the Budget. For example, I welcome the increase in the VAT registration threshold for small businesses to £35,000. I welcome also, although it was not a financial incentive, the Chancellor's determination to encourage Customs and Excise to persuade companies of a certain level of turnover to pay value added tax when the account is paid rather than when it is sent out. I welcome also the increase in child benefit.
It was a pleasure to listen to my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), who displayed a far superior grasp of the economy and its future needs than did the Chancellor and the Chief Secretary put together. My right hon. and learned Friend made it clear that had there been increases in line with inflation and, had the Labour party been in power, we would have been starting child benefit from a base of £9 per child.
I enter a note of personal sympathy. All my life I have suffered the disadvantgage of being a twin. My brother is 10 minutes older than me and, for the life of me, I do not understand why my mother would have received more money for him than for me. I cannot accept that. Perhaps the Minister will explain what happens in the event of multiple births and how they are separated for the payment of child benefit. I am glad that the Government have moved away from their refusal to increase child benefit because that was inflicting hardship and suffering on families.
One of the greatest disappointments in the Chief Secretary's speech was that he did not mention unemployment. The Budget will not put a single person back to work. Indeed, yesterday the Chancellor made it clear that unemployment will increase. I heard forecasts today of unemployment reaching 3 million and the right hon. Member for Chesham and Amersham (Sir. I. Gilmour) forecast 4 million. That is unacceptable. A total of 2 million is unacceptable and will severely damage Britain's social fabric. It will introduce trends into the social fabric which will be difficult to deal with by whichever Government are in power if they are not dealt with now.
If the Government are prepared to sit back and allow unemployment to rise to 3 million or 4 million, the quicker they are out of power, the better. I say that not only for the Labour party, although I declare a vested interest, but for the people of the United Kingdom. We simply could not tolerate that level of unemployment.
There is no hope in the Budget. I am speaking from the point of view of a Scottish constituency. There is no hope for the work force at Ravenscraig or for the work force at Rosyth naval dockyard. There is no hope for the 1,000

textile workers who lost their jobs in my constituency when clothing manufacturers had to close because of the recession.
I hope that the Minister will pay attention here. The Government wax eloquent about the need for share ownership among employees. I am in favour of that, but I hope that the Government will not give the impression that employees' jobs are protected just because they happen to own shares in the company. I can tell the Government a different story. ICI is world famous for its employee share ownership scheme, but in Grangemouth in my constituency, only two weeks ago, ICI announced that 250 workers—or shareholders—were to lose their jobs. In anyone's language that is a warning on employee share ownership. We should not give the impression, as the Government have done, that owning shares protects employees' jobs. It does not, and we should not mislead working people in that way.
I shall now refer to the link between VAT and local government finance. As the hon. Member for Londonderry, East (Mr. Ross) said, there has been a debate about whether the increase in VAT was 2·5 per cent. In my view, an increase of 2·5p on 15p in the pound is an increase of 16 per cent. If the Government were reducing VAT by 2·5p they would have claimed that that was a 17 per cent. reduction, but because VAT is going up by 2·5p they say that it is only a 2·5 per cent. increase. That increase is to finance the review of poll tax so that poll tax payers can pay £140 per head less.
That is one way of financing the poll tax cut, but the Government have chosen another way of raising revenue, too. Contrary to what the hon. Member for Londonderry, East said about there being no mention of the proceeds of privatisation sales, the Chancellor announced yesterday that the Government intend to sell at least part of their 48 per cent. shareholding in British Telecom. Part of the money is being raised by the Government selling public assets. The sale may affect the BT pension fund—I hope that the Minister will consider that question.
The hon. Member for Twickenham (Mr. Jessel) challenged the hon. Member for Berwick-upon-Tweed (Mr. Beith) to say whether he was in favour of the £140 per head reduction in poll tax that will be effected by the Bill to be introduced tomorrow. The hon. Member for Berwick-upon-Tweed said that he was in favour of it, but I am not in favour of the millionaire in his mansion getting a reduction of £140—he spends more on cigars in a week than that—and the old-age pensioner in her humble home getting a £140 reduction, too. The millionaire in his mansion should get nothing and the old-age pensioner should get three times £140. That would at least begin to approach social justice, or we might begin to be, as the Prime Minister put it, a nation at ease with itself.
We have not yet seen the Bill to be introduced tomorrow, but we understand that it will contain only one or two clauses. Anyone who thinks that it will be universally accepted has another thought coming. In arranging for a £140 per head rebate the Government have made the same fundamental error as they made in introducing the poll tax. Where everyone pays the same everyone will get the same refund. No one can convince me that the millionaire in his mansion is entitled to £140 back, in the same way as the old-age pensioner in her humble home.
We are talking about a complete review of local government. We are told that the Budget set the scene for


it, so it is relevant to the debate. The hon. Member for Windsor and Maidenhead mentioned local government, too. I shall not be here in the next Parliament so I shall not have a say in what happens. Let me warn the Government, and my hon. Friends who may have responsibility if a review is to be undertaken, that we should not do what was done when local government was reorganised in England and Wales in 1972 and in Scotland in 1973. The democratic element was reduced by 50 per cent. We cut in half the number of elected councillors, and in the process increased the bureaucratic element by more than 50 per cent. Everyone in the House knows that bureaucracy in local government grew because there was no democracy there to stop it.
Hon. Members on both sides of the House talk about local accountability. They should get off councillors' backs. That applies to all parties—I do not make a political point. Councillors from all parties do an excellent job in difficult circumstances. When the poll tax was introduced we were told that it would get the Government out of local government, that the Government would not interfere, and that local government would be accountable to the electors in each area. Local electors would deal with overspending. That concept was soon shed, first with poll tax capping and now with the Bill that will be brought before us tomorrow. We shall see the Secretary of State for the Environment at the Dispatch Box making the biggest climbdown in political history. But there will be a reduction in interest rates, too, to take some of the spotlight off that climbdown—let there be no ifs and buts about it. I choose my words carefully when I say that the Conservative party is the first party in the political history of the United Kingdom to put a price on a vote. The Government will try to buy the vote of every person over the age of 18 in this country for £140 a time—that is their strategy for the next election. Anyone who thinks that the British electorate will fall for that con trick has another thought coming.
I saw the Minister of State on "Kilroy" this morning. My better side tempted me to feel sorry for her, but my realistice side said that she deserved all that she was getting. She got a going over from people affected by the Budget.
We have heard a lot about the CBI, the Institute of Directors and the chambers of commerce. Just as I accept that sometimes trade union leaders do not speak for their members, I know that the CBI, the IOD and the chambers of commerce do not speak for their members. On "Newsnight" last night the managing director of a furniture manufacturing company in Bristol with 270 employees and a turnover of £50 million tore the Budget apart. He was asked if he had ever voted Conservative and he said, "Yes, but I am seriously considering whether I will ever vote Conservative again." That is the sort of comment on the Budget that we are hearing from the business world. Business men can see through the Budget. This is not a universally acceptable Budget and its backdrop is one of disaster after disaster.
The Budget was introduced with the general election in prospect. My interest in the date of the election differs from my interest in the election's outcome. I am interested in the election's date because I want to know whether I will be going home in June to start to grow chrysanthemums and gladioli and to tend my garden again or whether my departure will be delayed until October, November or even until next year.
The Government are taking a massive gamble. The Budget is the last throw of the dice for a desperate Government. If their gamble fails, we will see a political slaughter in this country such as we have never seen before. The Government are gambling with the future of the people of this country and the people know what is happening. That is why by this time next year my right hon. and learned Friend the Member for Monklands, East will be Chancellor of the Exchequer and my right hon. Friend the Member for Islwyn (Mr. Kinnock) will be Prime Minister. There will be a Labour Government, much to the joy and relief of the people of Great Britain.

Mr. James Hill: The city of Troy had only one Cassandra, but on the Opposition Benches today there has been a flock of Cassandras. Opposition Members have been forecasting more and more disasters. They have claimed that the public will take us to task because we are reducing the community charge. How far from reality are the Opposition? I have been chums with the hon. Member for Falkirk, East (Mr. Ewing) for many years. Why go out with such a black outlook? He should have faith in his country and in the work force. He should have faith——

Mr. Boateng: Get out.

Mr. Hill: Well, the hon. Gentleman can replace me if he thinks that I am not doing my job very well. Opposition Members should have faith in their country. The stock market is buoyant, the foreign exchange is steady, the ERM is not affecting us and we will be able to reduce interest rates in the very short term. In the face of all that, why all this gloom and despondency?
It is clear that the Opposition received a terrible shock yesterday. I watched their faces. The Liberal Democrats, like Labour Members, were decimated——

Mr. Boateng: Where are they now?

Mr. Hills: Obviously the shock was so great that they are now huddling together somewhere trying to create another policy on something.
I am almost inclined to apologise for yesterday's shock. I did not know what was going to happen. If I had known, I would have told some of my chums to relieve the shock. Some of them might have had cardiac arrests. I do not like the phrase "shooting foxes" because we might lose the animal lobby, but there is no doubt that several very promising attacks on the Budget had to be completely rewritten as a result of yesterday's shock.
I sense a great upsurge of relief. At long last we have a Cabinet that is determined to act. I want to recount the history of the community charge in Southampton.

Mr. Boateng: The hon. Gentleman voted for it.

Mr. Hill: I know, and I have written many letters saying that I cannot exonerate myself. However, when I first voted for the community charge, the estimated charge for Southampton was £178. I said to myself, "Okay. We're a low-rated area, but on the other hand £178 is quite reasonable". So I supported it. On the second occasion that I voted——

Mr. Boateng: How many times in all?

Mr. Hill: We voted on it twice. As a loyal supporter of the Government I voted for something that I believed would be much better than the rates. That evening, there was a minor rebellion on the Conservative Benches and I was appalled because my first loyalty has always been to the party.

Mr. Boateng: Never mind the country.

Mr. Hill: I believe that the country is best served by the Conservative party and that fits in with my sense of loyalty.
On that evening, I was told by members of the Cabinet who are no longer members of the Cabinet, "There's no need to worry, James. It'll be about £278 and we think you can sell that." When the Labour-controlled council announced its community charge of £317, I very nearly fell over. I thought that no one in the low-rated area of Southampton, Test would be able to pay it. A real cloud had appeared.
I kept hoping that others would view matters as I viewed them. Slowly, but surely, that began to happen. No matter what the Liberals have or have not done, they fought a good election in Ribble Valley. The public came out clearly on the community charge: they said, "Get rid of it." We were then accused of dithering and all the rest of it. When the dagger came out and went straight through the heart of the Leader of the Opposition, we were no longer dithering——

Mr. Boateng: The Conservtive party stabbed its own leader in the back before that.

Madam Deputy Speaker (Miss Betty Boothroyd): Order.

Mr. Hill: Indeed, Madam Deputy Speaker, and that was said by the hon. Gentleman from a sedentary position.

Madam Deputy Speaker: The hon. Member for Brent, South (Mr. Boateng) will have his chance later.

Mr. Hill: I am pleased that you, Madam Deputy Speaker, are protecting me from the violent elements on the Opposition Front Bench. I need as much of that protection as I can get. The hon. Member for Brent, South (Mr. Boateng) said that someone was stabbed. It was a perfectly democratically arranged leadership election. It would be counter-productive to consider what happened in those days. Why should we always think of the past? That brings me back to the Cassandras. Opposition Members always think about the terrible things that have happened and do not believe that anything good can happen in future.
The community charge will be reduced by £140 a head throughout the land, regardless of people's incomes, but we are already beginning to hear objections to that. Council leaders and treasurers claim on television that the notices cannot be issued in time. They claim that they will be working night and day and that it will cost another £60 million. They want more staff and, no doubt, longer tea breaks.
My right hon. Friend the Secretary of State for the Environment will introduce a Bill on Tuesday that will incorporate everything that we have said about the community charge today. I hope that the Bill will include a provision to the effect that there is no need to issue another lot of invoices or bills simply because those bills must be issued before 1 April. People have enough savvy

to strike £140 off their existing bills or, if they normally pay 10 cheques during the year, to strike £14 off their cheques. Let us at least save £60 million and much hard work for local authorities.
My local authority was dilatory when housing benefits were introduced, and it is just as dilatory now in respect of exemptions. People are getting two or three forms. The council is writing to the dead and to people under 18. That is all part of the system. The computerised society, which many hon. Members do not like, is not as efficient as we are told. I should not mind at all if my right hon. Friend the Secretary of State were to table an amendment to the Bill.

Mr. William Ross: Will the hon. Gentleman give way?

Mr. Hill: No. The hon. Gentleman had a good innings. My goodness, I sat here wondering what he had to do with the community charge. Irishmen are always pleasant and enjoyable to talk to, but not to listen to for too long. Today I thought that the hon. Gentleman spoke for a little too long.
The increase in VAT to 17·5 per cent. will be the source of a little grievance. That is possibly the hardest aspect of the Budget that I will have to sell to my constituents. It is difficult when the hon. Member for Falkirk, East accuses us of wasting more money on the community charge. Before long, everyone will realise that the additional VAT will pay for the extra help with the community charge. The majority of families will readily pay another 2·5p in VAT. I hope that the child benefit policies that have been introduced will make up for that increase.
Debates on business are not welcome in this House. We are always told that millionaires live in mansions. People ask, "What about the Japanese, Germans and others?" Millionaires who live in mansions can be Japanese, German, Irish or English. The hon. Member for Falkirk, East says that, for some reason, a person who invests in industry must be a millionaire. I have not yet heard of any trade union groups investing in industry, but no doubt I will hear about that later. Private investment mainly comes from people with money. Not all people who invest in the marketplace or the stock market or people who invest privately live in mansions. Some of them are humble—one can hardly tell that they have a penny to spare. Nevertheless, the main way to attract the attention of those people is exactly what has been done with corporation tax. Reductions in corporation tax from 35 per cent. to 34 per cent. in 1990–91 and to 33 per cent. in 1991–92 will do more than a thousand speeches by the hon. Gentleman.

Mr. Harry Ewing: I shall not be here.

Mr. Hill: No, the hon. Gentleman may not be here, but that is the way to encourage investment.
There are many items in the Budget for the small business man. Small business men are people such as tobacconists who supply workers with cigarettes, milk and so on. There is no doubt that the small business man has been under pressure. If we can raise the profit limit of small businesses to £250,000—it used to be called the small business relief, but I am sure that the new Chancellor will call it something else—we will help business enormously. My right hon. Friend the Chancellor recognises small shopkeepers' problems. He has raised the VAT registration threshold by nearly £10,000 to £35,000. A


small shopkeeper can now have a trade of £700 a week and not even have to register for VAT. How different that is from what happened in 1979.
There are problems with personal taxation. I have one little grumble. It is not like me to grumble, but personal allowances and all age-related allowances are raised in line with inflation, whereas the married couples' allowance for the under-65s is unchanged. Why? What is behind that policy? Is it the Conservative party, the party of the settled family? Is it more possible for two people——

Mr. Graham Riddick: The standstill is offset by the increase in child benefit.

Mr. Hill: I do not mind the Parliamentary Private Secretary, my hon. Friend the Member for Colne Valley (Mr. Riddick), or anyone else saying that. Two single people living in a house get two personal allowances, but for a married couple the position is unchanged. [Interruption.] Luckily my hon. Friend is not allowed to speak. [Interruption.] Married couples had better get on and have a few children? Is that what I am told by my Government? I hope that that is not so. We have had that problem in respect of council accommodation and so on.
One extremely good point that has not been mentioned is tax relief. [Interruption.] Would hon. Gentlemen on the Opposition Front Bench kindly listen? Tax relief for businesses would help to provide equipment for schools and other educational establishments. That is to be encouraged by hon. Members on both sides of the House. If a benefactor wants to present a kit of footballs, football jerseys, soccer boots and so on, why should he not be allowed tax relief on it? Exactly the same applies to the arts. My hon. Friend the Member for Twickenham (Mr. Jessel) made a good plea. That side of our social life needs more assistance. A lottery would have been absolutely right. I am sure that we shall get around to that in the not-too-distant future.
There has been tax avoidance through the use of non-residential trusts. That matter is almost white hot. The Jersey island of Bergerac has been used for many non-residential trusts. People gain. They pay only 20 per cent. on the island of Jersey, yet practically all their investments are held in the United Kingdom. It will be an extremely interesting Finance Bill. I look forward to listening to the reasons why non-residential trusts should be closed.
Opposition Members are aggrieved that there was a reference in the Budget to British Telecom shares being sold off. I do not see why they should be aggrieved, but I rather like the idea that the shares should be sold from high street shops. I like to think that Marks and Sparks or Boots or almost any other high-street shop will be able to sell shares over the counter. Although we have talked about selling shares over the counter, we have always been strapped into the stock market and it has been the brokers or the banks who have made the money. Now, however, there is a chance that shares will be sold from high-street shops. I hope that we get 100 per cent. support from the Opposition on that.
I represent a conurbation and have had the problem of having to go along with the community charge. I have never been happy about it. When someone said on "Newsnight" last night that a stake had been driven through the heart of the community charge, I thought that it was good news. I sat there smiling and today I am still

smiling. I am afraid that it will mean a desperately poor election for the Opposition. I am sorry that a lot of Opposition faces will disappear. Nothing will be safe. Once we get the policy into place and explain it properly, I am sure that we will be returned overwhelmingly.

Mr. Tom Pendry: It is always a pleasure to follow the hon. Member for Southampton, Test (Mr. Hill). However, having been watching the clock, I must advise him that it was a bit rich of him to chide my hon. Friend the Member for Londonderry, East (Mr. Ross) for going on a bit: I can honestly tell him that he was not far behind. I had the same feeling when the hon. Gentleman was speaking as he obviously had when my hon. Friend was speaking. However, I richly enjoyed his speech and the fact that he found bits of the Budget as laughable as many of us found them. I assure the House that I shall be briefer than both those hon. Gentlemen.
The Budget has been marked by two facets—one of fear and one of panic. As many hon. Members have shown, chief among the manifestations of the panic and fear have been the Government's desperate attempts to get themselves off the hook on which they have impaled themselves over the poll tax. As we all know, they have been defending the poll tax both inside and outside the House for many months. They did not listen to the advice of the experts or to the interested organisations. Most of all, they failed to listen to the electors.
Generally, most panic measures fail when they are put under any scrutiny. The electors of this country would be mistaken to think that only the poll tax has attracted ill-thought-out and hasty measures from the Government, but, as many of my right hon. and hon. Friends have already mentioned many of them, I do not intend to go over that ground again.
I had originally intended to raise the problems experienced by direct labour organisations, which are being penalised for ensuring that a high level of apprenticeship is maintained in the construction industry, and which are being hampered by the compulsory competitive tendering processes. Many of the apprentices who have been trained in the construction industry then go into the private sector. Although in some cases as many as 75 per cent. do so, the private sector is not playing as big a part as the direct labour organisations in continuing that process. However, as I realise that the arguments on that are lengthy, I shall not stress that point tonight.
It will be no surprise to many hon. Members who know me that I intend to highlight a crucial area of the nation's life that will suffer enormously as a result of yesterday's announcements. I refer to sport. Given the Government's hype about the Budget proposals for funding sport, hon. Members may find it curious that I am raising this. However, like most of the Government's dealings with the sporting industry, the Budget is yet another case of broken promises and smokescreen tactics, coupled with the hasty and last minute cobbling together of a scheme to avoid a national lottery, to which the hon. Member for Test referred. I shall seek to explain how yesterday's announcements can be described as a "conning Budget for sport". I hope that the Minister is listening. The House should consider many aspects of this issue, not just the question of a national lottery.
The Budget certainly does not contain any move to abolish corporation tax for sport, at which many people, including the Minister for Sport, hinted. Along with the Prime Minister, the Minister has been happy to bask in the glow of the initial, but now proven sadly misguided, title of "the dream ticket for sport". I hope that the author of that title is eating his words tonight. The Budget has delivered a rude awakening to any who may have shared that view.
In January, the Minister for Sport promised The Mail on Sunday that he would
look very hard at the financial structure of sports so that they can be released from having to pay corporation tax",
and professed to feeling
very strongly about the tax sport has to pay".
He added:
I believe we can change this and get more money into grass-roots sport",
but those worthy promises have proved to be just words. Perhaps the Minister for Sport should come to the House now to tell us how strongly he feels about the refusal of his partner in the so-called "dream ticket"—the so-called "sporting Prime Minister"—to aid sport in that way. If the Minister of State replies to the debate, I hope that she will answer those points. If one of her colleagues is to reply, I hope that she will pass on those comments.
Perhaps the Minister for Sport would explain to our rugby players, athletes and tennis players why he has failed to deliver the goods that he intimated that he would deliver, and what has happened to the much-trailed national lottery. That proposal appears to have been shelved or buried. In its place, we have a commitment to take £60 million out of football, where it is desperately needed to fund the requirements of Lord Justice Taylor's report, and to give it to some new body, the members of which we do not know, the structure of which is unclear, and on which we have not heard a single assurance from the Government about accountability or the monitoring of decision making or performance.
However, what is clear is that that money will not even all go to sport. Some will go to the arts, which already receives eight times the level of Government funding for sport. Government figures that were given to me only last year in a written answer show that total funding of the arts has risen over the past four years by 43·9 per cent., whereas sport has seen only a 16 per cent. rise in grant to the Sports Council, and has suffered a cut of over a quarter in the amount of money that is given to inner-city sport through the urban programme. Like, I am sure, most of my hon. Friends, I do not wish to see the arts knocked. They should receive a proper level of funding from central Government—and rather more than they receive at present.
What infuriates me, however, and many other sports lovers is that the Government refuse to meet their own responsibilities for supporting the arts but expect an already grossly under-invested industry, which is what football is, to subsidise their own inadequacy and unwillingness. It is like asking Bob Cratchit to pay Scrooge's poll tax, but stranger things have happened under this Government.
We do not even have any guarantees that the new body will see the light of day. As I understand it, the scheme has been concocted as a result of negotiations between the Government and one pools company—the one that has 77

per cent. of the betting turnover. I wonder what has happened to the party that believes in free competition. It has now negotiated a deal that penalises the minority players in this market.
Will the Minister give a clear undertaking tonight that the other two companies involved will be consulted about the structure that is to be set up to dispense their money? I hope that the House will have an opportunity to discuss that structure, because it will be a baffling prospect to many that any organisation will be able to satisfy the demands that will be placed upon it by the sports and arts lobbies.
However, even more damning for sport, and possibly the biggest sting of all, is that the proposals will not lead to net investment or to even a single penny for sport. Many hon. Members will be fascinated by the figures. The Budget will result in a massive subsidy from sport to the Chancellor, not the other way round. Even if sport was to get all the money going from the Government to the new foundation, it would still receive only £20 million, not in direct grants but in Government revenue from the football pools betting duty.
The Royal Commission on Gambling said in 1978 that the rate of 40 per cent. on football pools betting duty was too high and recommended that it be cut to 37 per cent., and that the money should be ploughed back into football. That recommendation came long before Lord Justice Taylor's report was envisaged. How much more desperately does football need the money now, never mind the needs of sport in general?
When one considers the effect of increased VAT and excise duties, the figure of £20 million is dwarfed by the amount of hard cash that will come to the Government from sport. A Sports Council official confirmed to me that the effect of increased VAT on its own will mean that our sportsmen and women will cough up—through, for example, increased charges for equipment and admission fees—a staggering extra £77·5 million at 1985 prices which translates into £105 million in today's prices. That is a net profit to the Government of over £80 million. We could say that the Government's sporting horse has come in at a starting price of 4 to 1. That does not take account of the effect of VAT, increasing charges for voluntary sports clubs of hiring grounds and equipment, or increases in excise duties.
So much for the great dream ticket for sport; so much for the sporting Prime Minister; and so much for the concern of the Minister for Sport about the amount of tax that sport has to pay. The reality is that the Budget is the biggest con for sport in recent history. If the Government were a racehorse, there would be cause for a stewards' inquiry.
Last night, a Conservative Member—I will not name him, for obvious reasons—told me that he was ashamed of being a Tory. It is a bad Budget. It is designed to save the Tories' own neck rather than to build the country's future. The Minister of State, the hon. Member for Norfolk, South-West (Mrs. Shephard), had a rough time this morning, as we have heard. The Gravesend constituency is considered the most representative in the country. She must have got a clear message from the audience that they recognised that it is a bad Budget which will fail them. She is probably still bruised from that exercise.
The Government began their life by increasing VAT. They will surely finish their life in the same fashion.

Mr. Matthew Carrington: I will not follow the hon. Member for Stalybridge and Hyde (Mr. Pendry) down the sporting route, although he knows that I follow the affairs of the football world with keen interest. Nor will I follow hon. Members who have discussed at length the effect of the Budget on the community charge, because that matter will be addressed tomorrow, probably in a statement. Remarks on that should be seen in their entirety, when we know how the community charge is to be altered.
There is no doubt that we have had a Budget for business because of the changes to the VAT regulations and rates, and also because of the changes in corporation tax. Business will also welcome the proposals for consultation about high street share shops. If we can persuade people to purchase shares in the high street from retailers, who may or not be banks or financial institutions but who will be much more accessible than the average stockbroker, that is an exciting prospect, if only because it holds out the opportunity of reducing transaction costs for share purchase. Transaction costs are one of the major obstacles to people buying shares. With the delay of the TAURUS system—transfer and automated registration of uncertificated stock—to 1992 in the London stock exchange, every effort should be made to ensure that transaction costs are kept to a minimum.
Having high street share shops to cover the primary market in shares may not be enough. They should also cover the secondary market, so that people could sell their shares as well as buy them in those shops. If the shops are to work in that context, consideration must be given to the operation of the secondary market in shares in the London stock exchange and the spread between bid and offer prices.
The principal item in the Budget which will be welcomed by business is the projection of Treasury economists, confirming the projection of other economists in the London market, that the inflation rate should be down to about 4 per cent. by the final quarter of the year. That would be a dramatic reduction and a great improvement on previous inflation projections. I believe that it will presage a tumbling of interest rates which will be extremely advantageous to business, large and small.
Interest rates have hit business and home owners badly. Businesses have also suffered because of the uniform business rate. In conjunction with the changes to the community charge, I hope that attention will be given to the effect of the uniform business rate on businesses in London and the south-east. It has by no means been beneficial, although there are undoubtedly major advantages to it.
There are dangers in low interest rates. If interest rates come down rapidly—I believe that they will, in a way which is sustainable within ERM constraints—the risk is that the property market will take off again, and that we will suffer another house price boom. The last property boom contributed to our troubles of high inflation and too much consumer spending because of leakage from the property market to the consumer market. As a result, interest rates had to be raised. We need to be cautious about how rapidly and how far interest rates drop because of the effect on the housing market.
I welcome the Government's decision to remove mortgage interest relief for higher rate taxpayers. That will

be at least a constraint on the property market taking off again, although the benefits that such mortgage holders gained was by no means as great as other tax benefits from investing in their principal home. The major benefit is capital gains tax relief. Investment in principal homes rather than in other parts of the economy has led to a major distortion of the investment market. While it is not necessarily more beneficial to the economy to have investment in other areas rather than in bricks and mortar, it would be nice to get a better balance between property and other sectors of the economy.
As interest rates come down, and as people start to borrow, there will be calls from the Labour party, especially from the right hon. and learned Member for Monklands, East (Mr. Smith) and from the hon. Member for Brent, South (Mr. Boateng), for the institution of credit controls. Of course, credit controls are nonsense now and would be nonsense in future. There is no possibility of them working without the reintroduction of exchange controls. If the Labour party ever formed a Government and structured a Budget, it would introduce exchange controls to stop leakage, because in no other way could it introduce credit controls.
Labour Members talk also about compensating balances and reserve asset ratios for banks. But those are merely other means of jacking up interest rates. If one wishes to constrain the way in which banks lend, it is much better to do it through interest rates than by phoney ratios which have no other effect than indirectly to affect interest rates. They certainly have no effect of shaking off borrowing, other than through the indirect pressure on interest rates which they produce.
The danger we face is incidental to our membership of the exchange rate mechanism. It is important that we consider moving rapidly towards entering the narrow band of the ERM, because that constraint will be important to us. At present, we suffer in the ERM from the fact that the deutschmark is—or has been—extremely strong. There are now clear signs from the German economy that the deutschmark is about to enter a phase of structural weakness, if only because of the high cost of reconstructing eastern Germany and the consequential large budget deficits that the German economy will run. They will be offset partly by higher interest rates and a rise in German domestic taxation, but the result will almost certainly be a weakening of the deutschmark.
The consequence of a weaker deutschmark may also be that the pound will start to rise to the top end of the band in the ERM, forcing us to reduce interest rates more rapidly—indeed, to a lower level than we would otherwise have wished. In itself, that may have inflationary consequences in Britain, because, if nothing else, property prices would be stoked up.
The way to get around that within the mechanism of the ERM is to recognise that we must be either in the ERM or out of it. As we have decided to be in it, we ought to be in it entirely. We should ensure that the ERM is altered in such a way that there is a common interest rate and foreign exchange policy across European Community countries and control of the different reactions of currencies within the ERM. That would mean that we would not be forced to adjust for domestic German policy by changing our own interest rate policy. That can be done only if we enter the narrow band of the ERM and move fairly rapidly to


some form of Eurofed or central bank in the EC. That is important, because the only alternative is to come out of the ERM altogether.
The Budget will benefit business. If for no other reason than the fall in interest rates, we shall start to see business take off again, and we shall begin to come out of the recession later this year. That will be welcome and will set us back on the path of growth and economic strength which will be the foundation for great prosperity. As I and all my hon. Friends believe, that will lead us forth to a successful general election campaign when it comes.

Mr. Ted Leadbitter: I have considered most of the comments made by the economic analysts in the press and other areas of information provision and concluded, after the most careful thought, that the Budget was a dog's breakfast. It does not meet, even in the slightest way, the problems of the country.
I do not have to call on Labour party opinion and policy or, indeed, any platform to underwrite what I have just said. I call in aid the report issued on 14 March of the Select Committee on Science and Technology, in another place. It said that the policies of the present Government include no commitment to industry. It is a Committee on which Conservatives are in the majority. After careful consideration and after examining witness after witness, the Committee's report said that, if the present policies were persisted with, Britain would not have any British-owned manufacturing industries. That is the risk. It also said that the Government had no strategy for industry and no policy that took into account the national interest.
This piddling little thing called the Budget—we had the usual ritual of the walk in the park before the Chancellor arrived here, and the little red box, which has more said about it than was in it—was a bit of a dog's breakfast. I call in aid another factor. In the House this afternoon, I raised a matter which is current. The calamitous news in Barrow-in-Furness will cripple the economy of that populace. I raised another matter this afternoon which is causing great concern. The Minister's answer was not much. He told me that he intended to talk to the Commissioner, Leon Brittan. I know that they deserve each other. Ministers made so much of the meeting. One might ask the Commissioner, who is a British subject, whose side he is on. I asked a question arising from Lloyd's List of 3 March, which said that there had been a calamitous decline in shipbuilding in the United Kingdom—of 80 per cent. in 10 years. Britain, which had the most magnificent shipbuilding industry in the world has experienced an 80 per cent. reduction of what was left 10 years ago. The newspaper added that Denmark, Germany and Italy have increased their share of world shipbuilding orders while Britain's share has shrunk to 0·77 per cent.
I feel a little ashamed. When I was a young lad, my father used to tell me about Britain. When I grew up, I began to learn about British-made. It was better than a handshake and a good deal done. Our word was our bond. What do we have now? We have not only a shipbuilding industry which is almost non-existent but a mere 0·77 per

cent. share of world orders. There must be a state of madness in Government Departments to allow our great country's major industries to be in a state of decline.
Another matter which the Budget statement did not touch on was the closed Ravenscraig steelworks. Thousands of people have lost their jobs. One must apply a multiplier to the immediate unemployment created. If 2,000 jobs are lost at a factory, the multiplier, which is never less than two, makes it a loss of 4,000 jobs in the area. What a disgusting, messy nonsense it is that Black Bob—he got his name well enough as chairman of British Steel—says that he does not intend to allow anyone to buy the works to compete with him. As in the case of shipbuilding, the British steel industry, which once accounted for 20 per cent. of steel making in the whole of Europe, has now been reduced to a size that does not reflect the significance that it once enjoyed.
Did the Budget include any reference to the dilemma faced by people who want to save communities in the coal industry? Not very long ago we were producing 75 million tonnes of coal for the power programme. The figure is now 60 million tonnes. There is now talk of coal being imported from abroad—cheap coal extracted by cheap labour. Indeed, the privatised electricity industry is buying coal mines abroad. Is there something wrong with that? Of course there is. It stinks. When I go abroad I want to speak well of my country; I do not want to be reminded that the major pillars of our industrial economy have been knocked down.
The best economists and chancellors in the world are the housewives. The Conservative party need not think for one moment that what it is doing about the poll tax will get it anywhere. The housewife will ask, "What is it that is a charge on my domestic budget but is not being taken into account by the House of Commons?" We hear a great deal of impressive economic jargon. Hon. Members enhance their self-importance by referring to such things as the ERM. The ERM is just another name for the fixed rate. We all know the history of fixed rates in this country. The housewife, when she is talking to her husband about the week's budget, will say, "The new financial year is starting. We have been told that the price of electricity is going to rise by more than 17 per cent., and that we shall have to pay more than 12 per cent. more for water. We have been told that fares are about to go up, and that we are going to have to pay more for food and household goods. You will have to pay more for the petrol that you use travelling to work." The list goes on and on. The housewife will say, "How are we going to meet these extra costs? Those daft Members of Parliament tell us not to make wage demands, because they want to get inflation under control." Members of Parliament and other people who are well off do not have to ask how they will manage to meet the extra costs.
What of the poll tax? I chaired the Standing Committee that dealt with the poll tax legislation. Every member of that Committee expressed concern. What a stupid idea it is to try to tax at local level people who are always on the move. What an awful proposition. But now, having said time and time again over the past two years that the poll tax would work, the Government, in a panic, are doing something about it. The Ribble Valley by-election hit them on the head, and they said, "My god, we can't win an election. We had better get rid of the poll tax." So they put the extra burden on VAT.
I have news for the Government. Value added tax—and I am talking not about zero-rated goods—represents a higher proportion of limited incomes than of higher incomes, and is therefore a regressive tax. People on family income support who are under the threshold do not have to pay poll tax, but even they—people with less than £50 a week to play with—will have to pay an extra 2·5 per cent. in VAT. It does not make sense. For those without money in their pocket, life is going to be hard.
As other hon. Members have waited a long time for the opportunity to speak, I intend to say very little more, but there is one more point that I want to make. Irrespective of whether we like it, Members of Parliament have to make political judgments. There is great concern about how to get the best response from the electorate. Sometimes we make the mistake of making promises—offering carrots. I can tell the House that the electorate will respond favourably if they see consistency of principle, if they see in Members of Parliament examples of public service. They will vote for candidates whose behaviour demonstrates that they are concerned about people. They will not be fooled by carrots—offers of concessions—in the hope that they will deliver their votes in a few weeks' or a few months' time. The public are bigger and better than that. This is Britain. There are higher standards and better examples to be found out there than in here. That had better be understood. Otherwise, something else might be at risk—democracy itself.

Mr. Kenneth Hind: I welcome the opportunity to speak in the debate. The hon. Member for Hartlepool (Mr. Leadbitter) has just made a stirring speech on behalf of the Opposition. I say to the hon. Gentleman, and to the many people who criticise the Budget from an expenditure point of view, that when the economy is not at its strongest money has to be earned. Industry has to prosper before money can be spent. That fact must be taken into account. Many of the industries to which the hon. Gentleman referred have changed in nature. They have become far more productive; with advancing technology, there is a smaller manual element. Thus, there are fewer jobs.
The most important element of the Budget is the community charge. The public cried out to us for a remedy. Rejection of the tax was widespread. It caused low-income and middle-income families a great deal of difficulty. It eroded the disposable income of many people and the situation had to be rectified. In introducing an extremely bold policy my right hon. Friend the Chancellor of the Exchequer has addressed the problem. The community charge will be reduced by £140 a head for every payer. It is a sensible measure that will be greeted by the majority of the British people as a common sense move. My right hon. Friend has chosen to raise the money to meet the reduction in the community charge by increasing value added tax by 2·5 per cent. I have listened to the complaints about that, but the reduction of the community charge means that the average family will save £280 a year. That family will have to spend at least £11,000 a year on goods and services that attract VAT before it is worse off. That puts the issue in context.
What are the main essentials for a family? When we answer that question we take into consideration items that are zero-rated, such as children's clothes and shoes, fuel

for heating and housing costs. Those are essential items that form the basis of the bills that face every family. As they do not attract VAT, it is clear that the majority of families, including pensioners, single parents and those who are unemployed, will be better off as a consequence of the policy that my right hon. Friend the Chancellor of the Exchequer has produced.
I say in a jocular sense that I look forward to the other half of the Budget, as I see it, which will be introduced tomorrow afternoon when my right hon. Friend the Secretary of State for the Environment tells us exactly what he plans to do in the long term. Many of us appreciate that that will lead to the abolition of the community charge.
It is important to understand that we are discussing a Budget for business. Certain factors are not understood by Opposition Members. I listened with interest to the members of the Opposition's team of polytechnic lecturers who speak from the Opposition Front Bench on Department of Trade and Industry matters. They tell us how we should run the economy, but they have never had to worry about where wages come from, about the cash flow of a company or how they will ensure that their workers have training and expertise. These Front-Bench Opposition spokesmen have no experience of those matters. I am a barrister, the chairman of one company and the director of another, and I have relevant experience, as do my colleagues who sit on the Government Front Bench.
There will be cuts in corporation tax and additional help with bad debts. The cost of those measures will total £570 million. That sum will find its way into long-term investment, including the creation of new jobs that will be available when we see the upturn in the economy, which I am sure will come.
We cannot ignore the small business element. The Budget will lead to changes in the collection of tax and to national insurance relief. It will raise the limit of VAT registration to £35,000. The submission of small business accounts will be by way of statement when there is a turnover of only £10,000. These are major improvements that will be greeted with enthusiasm by those who run small businesses. They will work their way through in economic activity and job creation throughout the country. The theme that is forgotten is the overall downward thrust on inflation which in the next few months will lead to a reduction in interest rates. The present level of those rates is the major complaint of every business throughout the country and their reduction is the key to our future prosperity.
We took a bold decision to go into the exchange rate mechanism. It seems clear that the decision made on the value of sterling when we entered the mechanism will be sustained. That in itself will bring a downward pressure on interest rates. Who else will benefit from a reduction in interest rates? The answer is the 65 per cent. of British people who own their own houses and who pay mortgages. A reduction in interest rates will put more money into their pockets. That will lead to their having a greater disposable income and that benefit will work its way back into the economy.
Another important element is the green policy contained within the Budget. I make no apology to those who complain that the price of cigarettes will be increased. How much money do we spend on the national health service year on year to enable it to deal with


smoking-related diseases? The hon. Member for Brent, South (Mr. Boateng) laughs, but we are spending millions of pounds on cancer research and treating people for heart disease within the NHS, much of which is related to the amount of smoking that takes place in society. We all received a letter from Action on Smoking and Health last week. That organisation is concerned about the increasing numbers of young girls at school and of married mothers at home who are smoking. An increase in the duty on cigarettes will be a major deterrent that will lead to an improvement in the health of the nation.
The same can be said of alcohol. Drinks that contain high levels of alcohol will bear the greatest amount of duty. My right hon. Friend the Chancellor of the Exchequer has rightfully decided that low-alcohol beers should attract a smaller amount of duty.
We have a major problem with the greenhouse effect, so we are encouraging lean-burn engines. It will cost more for petrol, but the encouragement is for lean-burn, smaller engines for the future. It is not without significance that, overall, Britain has the lead in lean-burn technology. As time goes on we shall probably benefit from that; the cars of the future will have smaller engines and will consume less petrol.
Although I believe that child allowances in tax terms should be the way to target money at the most needy, I know that the increase in child benefit will be greatly appreciated by the vast majority of families.
This is a diverse Budget which deals with a good many difficulties. It is imaginative and it attacks the major problems that face us today. I have no doubt that it will be greeted warmly by the vast majority of people.

Mr. George Walden: I congratulate my right hon. Friend the Chancellor of the Exchequer on a highly intelligent and socially sensitive Budget. I also congratulate the Chief Secretary on his typically meaty contribution to the debate, and remark in parentheses that the broadcasting authorities and interests who have good reason to be grateful to him for his sensible and enlightened conduct of the Broadcasting Bill are lucky to have someone in the Treasury who will be sensitive to their concerns when these matters raise their heads again.
My main point concerns something that other hon. Members—I apologise for my temporary absence earlier this evening—have not addressed: housing. My right hon. Friend the Chancellor, in deciding to reduce the 40 per cent. mortgage tax relief to a flat rate of 25 per cent. for everyone, mentioned his desire to avoid another upsurge in the housing market.
We are in a curious situation in the House when it comes to housing. Whatever subject one may care to take, hon. Members on one side or the other, Labour, Liberal Democrats or ourselves, will tell the public the truth about the situation. It is all too rare for this to happen with housing, particularly with mortgage tax relief. Nothing should be taboo for discussion in the House, yet somehow we all know that there is something fundamentally, culturally wrong with housing finance. If one were to lock the Conservative, Labour and Liberal Democrat leaders in a room for half an hour and tell them that they must agree on one thing that would benefit the economy of the

country in the longer term, however controversial it might be politically, they would all come out with the same answer: the total abolition of mortgage tax relief.
Let us not forget that this problem has a history. It is not so much a cultural history, it is a cult of house ownership. When the Government talk about encouraging further house ownership, it may be electorally appealing in the immediate future but it is also financially and economically damaging. How far do we want to go? We have nearly 70 per cent. house ownership now. Do we want 100 per cent. house ownership with all the immobility of labour that it implies? Have we spared a glance for the position in some other countriess, the economies of which tend to be in better shape than ours and where there is a healthier mixture of ownership, rental and state provision? It seems that there is something wrong and unhealthy with the state towards which we are heading, with 70 per cent. house ownership and beyond, because so much of that is based on state subsidy. It is no good arguing that the £30,000 tax relief limit is withering away, when the actual cost to the Treasury is going up by leaps and bounds. It has gone up by about 50 per cent. during the past few years and now stands at £8 billion. With my own little interest in education, I note that that is precisely the same sum as the cost of teachers' salaries—an interesting little side point.
The enormous figure of £8 billion which is coughed up by the Treasury does not help people to gain their houses or help first-time buyers, but, as everyone outside the House knows and says, it inflates the price of houses. The result in my constituency, which is rural, is that people born in villages cannot afford to buy houses in them. It is important for the subject to be debated honestly in the House. I understand perfectly well why the Government find it difficult to be as frank as they might be inclined to be on the subject, and I am tempted to say that I understand why the Opposition are a little reticent. However, it is important for us to confront the public with the realities of the inflated cost of housing.
One of the many distortions to which this state leads is in the private rented market. The Government have rightly introduced legislation to liberalise the private rented market, but no one in his right mind will rent a house if he can receive Government subsidy, in the shape of mortgage tax relief, to buy one. That is one reason why the private rented market has not taken off and remains at the stultified and completely artificial level of about 9 or 10 per cent., despite the Government's best efforts to improve it.
We could develop the subject ad nauseam. The Organisation for Economic Co-operation and Development has said that the existence of mortgage tax relief in the British culture of house ownership distorts the relationship between productive and non-productive investment—in bricks and mortar, money under the floorboards—to an enormous degree. It distorts the mentality of people's financial planning. Extraordinary figures show that the average mortgage indebtedness of individuals in this country is about double that of analogous countries. The culture of house ownership distorts our wage-claim philosphy. As soon as interest rates go up after a housing boom, people feel that they are entitled to ask for a wage rise to compensate them because their financial philosophy is based on mortgage tax relief and the extent to which they have got themselves artificially indebted because of their mortgage commitments.
This is a fundamental problem in the British economy which, uniquely, cannot be frankly discussed by the Government or the Opposition and so is rarely talked about in this place. However, every responsible economist outside the House and every major, quality newspaper, including The Times this morning—which asked why the Chancellor of the Exchequer had not done away with the whole damned thing while he was about it—agrees that this is a pernicious system that is damaging to the British economy, housing interests in general and home buyers.
There are paradoxes here. I recognise all the politial problems of doing away with mortgage tax relief. They are common to hon. Members on both sides of the House. We all understand the difficulties of presentation to the public. But if mortgage tax relief were done away with, the first thing that would happen would be that house prices generally would fall. In my personal estimation, they would fall by more than the tax relief in question. It is exactly like going to Harrods or any other shop during the sale—people tend to buy things that they do not need. In just the same way, the very existence of mortgage tax relief encourages people to pay more for their houses than they should.
The paradox—it is an important economic paradox—is that if mortgage tax relief were done away with or phased out, house prices would be reduced by more than the tax relief is worth. The result of that—this is the important point—would be that people's mortgages would be less than they are at present.
Since I am making a bit of a virtue of being honest, let us be honest about the repercussions of that. The general level of house prices would stagnate or perhaps even subside. Therefore, people's sense of what they owned in terms of capital might stagnate or subside. But we must be frank and honest about that. Is it a good thing for Britain's future economy that people should have a permanently inflated sense of the value of their property? I rather doubt whether that is so. In this, as in other elements of the Government's policy over the past 10 years, realism and honesty are probably the best policy, particularly in terms of Conservative philosophy. We cannot say that our philosophy in economic matters is based on choice and at the same time say that the be-all and end-all of a person's economic existence is house ownership. There is a fundamental contradiction there.
Economic choice in the housing market means a choice between buying and renting. It is as simple as that. But the market is skewed by the fact that we spend £8 billion a year—I repeat, the total cost of teachers' salaries—propping up artificial prices in the housing market. Our philosophy is skewed and contradictory and, while that goes on the private rented market in Britain will never take off in the way that the country needs, both to expand that stunted market and to create a level playing field in housing terms.
We are all grown-up people and no one, other than misguided individuals such as myself, talks about such matters before an election. But this is a fundamental problem which will not go away. That is why I am taking this opportunity to make some remarks that will be highly unpopular among many people in the country and which will marginally embarrass members of the Government Front Bench, except that they know that what I say is true and that the remedies that I advocate are the right ones. I suspect that the Opposition know that perfectly well, too.
I conclude with the perhaps slightly excessive remark that the continued existence of mortgage tax relief, which

inflates prices, distorts the economy and contributes indirectly to the appalling problem of homelessness, is to some extent due to a conspiracy of silence in the House among all political parties. However, I have enough residual political realism to realise that nothing will be said or done about the problem this side of an election.

Mr. Paul Boateng: On the eve of the Chancellor's statement, the country looked to him for a Budget for manufacturing industry, for training and employment, for mother and child, for sustained and sustainable investment, and for growth and recovery within a decent environment.
Yesterday, the House and the country got a Budget born out of desperation and rooted in failure. The desperation prompted a squalid political bribe of unsurpassed proportions to be delivered, in an unprecedented fashion on the back of an unparalleled transfer from local to central taxation, by a substantial addition to the rate of value added tax. The failure was a failure in the economy.
In his opening remarks, the Chancellor paid a somewhat surprising, but nevertheless heartfelt, tribute to his predecessor, the right hon. Member for Blaby (Mr. Lawson). In so doing, he invited a comparison between the right hon. Member and himself that I think the Chief Secretary to the Treasury will well understand—a comparison in performance. I shall try to explain it. I said that I believed that the Chief Secretary would understand it because the English National Opera company—of which I am director—has a reason to be thankful to him in another incarnation and I know that he is a great lover of the lyric verse.
The best way to describe the performance of the right hon. Member for Blaby on these occasions used to be "bravura". The performance of the Chancellor was much more "sotto voce", more of an Italianate tenor—a lightweight Figaro. That is how I would describe him, as a deft but lightweight Figaro whose bits of business—we all know what a great one Figaro was for bits of business—were not designed simply to enhance one's understanding of the piece, although it must be said that they were ingenious bits of business and brought cheer to some of the audience who feared that they might otherwise lose their seats. Nor were his bits of business even designed to take the action forward, which is always a good excuse for a bit of business in opera. No, on this occasion they were designed to keep the set from falling down on the heads of the players.
That was the point of all of those ingenious little steps, although some were large, histrionic steps—consider the hike in the rate of VAT. We shall remember that performance. However, the failure is a serious matter.

Mr. Mellor: What about Brunhilde?

Mr. Boateng: No, Brunhilde is in the past. She has had her day and has been disposed of in the most unpleasant and Wagnerian fashion. The Chief Secretary must not be naughty, although his role in those matters is suspected, if not known. I want us to consider the failure that necessitated the bits of business. One hundred business failures, 4,000 job losses and 150 house repossessions every working day: that is the extent of the failure. The CBI's


optimism indicator—an interesting criterion by which to judge a Conservative Government—is at its lowest since 1980, at minus 51 per cent.
Moreover, we must not forget the figures that the Chancellor left out yesterday. Fixed investment, predicted last year to fall by 1 per cent., is now predicted to fall by 10 per cent. Manufacturing output, predicted last year to fall by 1 per cent., is now predicted to fall by 5 per cent.
What we encountered was a phenomenon to which Opposition Members have grown accustomed. We encountered it last year with the former Chancellor, the present Prime Minister; even the right hon. Member for Blaby was given to using this simple device from time to time when he had cause to do so. The device to which I refer is best illustrated by a comparison with a certain cynical, indolent servant of the state—a figure whom the Chancellor, whose love of the cinema is well known, is bound to recognise. Hon. Members will remember the part played by Claude Rains in the movie "Casablanca". Whenever things got out of control and he—through his own indolence or unwillingness—was not able to put them right, he would latch on to the device of rounding up the usual suspects. "Round up the usual suspects!", he would say, and a few tattered figures would be drawn from the casbah.
Hon. Members will remember the scene. Time and time again, throughout the movie, the same thing happened—and that is what has happened in successive Budget speeches over the years. Who, then, are the suspects? It seems that the basic cause of the problem is the same everywhere. We hear of cyclical influences, global phenomena and—I think that this is the best of all—recession, the inescapable feature of the market economy. That is rich, coming from a party that has told us year in, year out, to worship at the feet of this Moloch. "Round up the usual suspects!"
I was a little worried by the fact that, this year, the usual suspects appeared to be pretty thin on the ground. I see the Chancellor craning his neck to see what is coming next. After a while, of course, all the suspects disappear; they are not so obliging in coming forward. The Secretary of State for Trade and Industry and aficionados of late-night debate will recall his contribution last year, when he was, if memory serves me right, Financial Secretary to the Treasury. It was a startling contribution. This year, however, he was clearly a little concerned that the usual suspects would not be readily to hand. From an article in the Financial Times of Monday 11 March—and a good read it was——

Mr. Nigel Griffiths: I remember it well.

Mr. Boateng: —we were to discover a new batch of "usual suspects": highly unusual suspects, in view of the Conservative party's composition and policy. We were told that our problems arose because
"we have an over-developed finance function, vis-a-vis the production function."
We could have told him that. Indeed, the last time I saw that phrase used was in the New Left Review. The correspondent with the Financial Times felt obliged to point that out.—[Interruption.] I see that the Minister of State, Treasury read the same letter as I did.
Why should we be surprised that those views have been espoused? After all, the Conservative party chairman felt it necessary to refer to the interesting concept of the social market economy in no less a publication than Marxism Today. If that is the vehicle of the chairman of the Conservative party, why should not the New Left Review be something from which the Secretary of State for Trade and Industry culls his new ideas?
He went on to say—this is where the "usual suspects" appear—that
We have 120,000 accountants compared with 7,000 in Germany. The inevitable thing in a company dominated by financial people is an excessive preoccupation with succeeding in making deals rather than the predilection of the production manager and the engineer to proceed by organic growth.
We now have a new batch of "usual suspects"—accountants. If there is a profession more populous among the new breed of Conservative Members than estate agents, it is accountants. In their desperation, the Government have turned on the accountants. However, I do not want us to become too hung up on the accountants. We should look at what the engineers have said about the Budget.

Mr. Walden: rose——

Mr. Boateng: I shall give way later.
The Chief Secretary trotted out a series of favourable reviews. However, he overlooked the review by Ian Thompson of the Engineering Employers Federation—an engineer. That will please the Secretary of State for Trade and Industry because he is not yet among the "usual suspects". That review said that the Budget was
not an adequate response to the problems of United Kingdom industry and does not address the problems of companies not having enough cash to invest for the future.
That was the judgment of the engineers. This afternoon, we heard the judgment of the accountants, and we all know where they stand on the issue. We must look to Mr. Thompson and the Engineering Employers Federation to find the true reflection of the Budget's worth.
Concern has been expressed by many hon. Members about the belief that the engineering and manufacturing industries were not getting the deal that they deserved from the Budget. The hon. Member for Saffron Walden (Mr. Haselhurst) rightly said that he believed that the Government might have difficulty in making stick the view that this was a Budget for business. At least he was frank. The hon. Member for Fulham (Mr. Carrington) was less frank. He said that there is no doubt that it is a Budget for business. There was an ambivalence on the part of Conservative Members, and with good cause, because the Budget does not meet—as we would have it meet—the deep-seated needs of the British economy.
In the Budget statement and the Red Book which supports it we find a number of unlikely assumptions and false forecasts that lead us to believe that the Budget is about electoral considerations and short-term political advantage rather than about meeting the immediate needs of our economy.
The Chancellor said in his Budget statement:
If I may confess it, I do not believe in miracles".—[Official Report, 19 March 1991; Vol. 188 c. 166.]
Remember the economic miracle to which my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) had cause to refer time and again? It is an albatross around the Government's neck. We are told that the Chancellor does not believe in miracles, yet we are asked


to believe in a Budget that is constructed around a number of assumptions whose plausibility looks dubious even now and will look increasingly dubious in future. The Budget deficit of £8 billion must be delivered without spending cuts in the next autumn statement. Inflation must fall to 4 per cent. by the fourth quarter of 1991, and interest rates must fall dramatically. All that must be achieved within the ERM and in an uncertain world.
If we are to achieve 2 per cent. growth between this summer and next, interest rates will have to fall and stay down. The United States economy will have to recover and drive world growth. United Kingdom companies will have to disavow reductions in investment, jobs and stocks. Will that happen? Will the hon. Member for Derbyshire, South (Mrs. Currie) take a vow of silence? Will the hon. Member for Billericay (Mrs. Gorman), who has gone off in a huff, suddenly convert to the command economy? Will it happen? Will it hell.

Mr. Walden: Will the hon. Gentleman give way?

Mr. Boateng: I promise that we shall hear the apologia for the accountants in due course.
We can therefore be forgiven for being somewhat sceptical about the assumptions that lie behind the Budget.

Mr. Walden: The hon. Gentleman's speech is more entertaining than enlightening. Why does he not recognise that three of his favourite foxes—child benefit, mortgage interest tax relief and the community charge—have been shot, leaving him bugling away to the empty air? Will he now tell us exactly what he would do?

Mr. Boateng: I do not have a favourite fox, but those among my acquaintances are very fit and will yet outrun Conservative Members.
In the moments that remain to me, however, let me seize with both hands the opportunity to examine what we believe needs to be done. We have outlined it clearly enough, but I am only too happy to reiterate it. We believe that it is important that the Government should reverse the cuts that they have made in employment training and youth training. We are disappointed that all we had from them was the paltry £20 million-worth of allowances. [HON. MEMBERS: "Paltry?"] Yes, it is paltry when compared with I he £245 million that the Government have cut from the youth training and employment training budgets. That cut should be reversed. We believe that there should be a temporary work programme for the long-term unemployed and we have called for a specific programme to achieve that.
We believe that, in regard to child care and support for children and mothers, the proposals in the Budget about child benefit are completely inadequate. Child benefit should have been increased to £9·55 a week for all children and we entirely accept the point made most cogently by the right hon. Member for Chesham and Amersham (Sir I. Gilmour). It makes no sense to distinguish between the first child and any subsequent children. This year, a two-child family will lose £154·70 as a result of the Government's failure to upgrade child benefit.
We believe that more should have been done in relation to the environment. To describe what the Government have done as a green tinge is a misuse of language. The Government had an opportunity, which they failed to take, to begin to create conditions that would have a real

impact on the misuse of the car through the use of differential VAT and differential vehicle excise licensing, but they failed to take that opportunity.
We believe that it is important to emphasis research and development and to use capital allowances imaginatively and progressively to achieve that end. That was the call made by the Confederation of British Industry and by the engineers.
The Budget is a wasted opportunity. The Government have failed the country and they have failed to meet the challenge of the times. In due course, they will pay the price of that failure.

The Financial Secretary to the Treasury (Mr. Francis Maude): This has been an enjoyable debate. It is some time since I had the pleasure of taking part in a Budget debate and this has been a spirited and delightful day. I very much enjoyed the speech made by the hon. Member for Brent, South (Mr. Boateng). It was strong on style although a bit short on content. It was good on opera and films, but a little light on economics. It may be a pedestrian view, but I believe that a debate on the Budget should at least touch lightly on economics at some point. None the less, the hon. Member for Brent, South made a very good speech and we all enjoyed it.
My right hon. Friend the Chancellor of the Exchequer has not been with us in the Chamber for much of this debate. However, I suspect that his ears were burning as a result of the large number of compliments that were paid to his Budget. I will spare his blushes by not listing all the plaudits.

Mr. Nigel Griffiths: Go on, list some.

Mr. Maude: Very well, I will. My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) described the Budget as civilised and intelligent. Many of my right hon. and hon. Friends used other adjectives. Very few of my right hon. and hon. Friends found anything to cavil at in the Budget. It was slightly disappointing that the hon. Member for Hartlepool (Mr. Leadbitter) chose to describe it as a dog's breakfast. If that is right, it is some dog and it must be a very filling and nutritious breakfast.
To paraphrase my hon. Friend the Member for Saffron Walden (Mr. Haselhurst), he pleaded that we should be nice to manufacturing industry. I believe and hope that we are. Perhaps I can say something nice about one particular part of manufacturing industry which has been the subject of much comment—the car industry. The car industry did astonishingly well during the past year—[Interruption.] Opposition Members may laugh, but it is an important matter. They may like to listen. In the past three months motor vehicle exports from this country rose by 50 per cent. over the equivalent period a year before. Opposition Members may think that that is funny, but we think that it is to be commended.

Mr. Hind: My hon. Friend makes a very good point. Is it not a credit to the fact that Britain has been prepared to invite inward investment from Nissan, Toyota and so on? People are building cars in this country and exporting them to the European Community, and that plays a major part in closing the trade deficit with which we are currently wrestling.

Mr. Maude: My hon. Friend is entirely right to draw attention to the large amounts of investment coming into this country. Despite Opposition Members' efforts to talk it down, this country is now a rather good place in which to manufacture goods, as people outside the Labour party increasingly recognise.
I shall deal briefly with the speech of the hon. Member for Berwick-upon-Tweed (Mr. Beith). The main burden of his song seemed to be that we should hand over control of monetary policy to an independent central bank. That demonstrates in an aspirant Chancellor of the Exchequer a certain lack of confidence in his ability to control monetary policy. If there were ever the prospect of his being Chancellor of the Exchequer, the attractions of having an independent central bank might become rather more apparent.

Mr. Beith: It was the view of the previous Chancellor, the right hon. Member for Blaby (Mr. Lawson). Was he dissatisfied with his capacity to run monetary policy?

Mr. Maude: The hon. Gentleman wants to hand over control first to the Bank of England and then to a European central bank. I am bound to say that that view does not command much support on this side of the House.
The hon. Member for Norwich, South (Mr. Garrett) referred, as did my right hon. Friend the Chancellor, to the erratic nature of some forecasts. The hon. Gentleman expressed a strong preference for private sector rather than public sector forecasts. That represents a damascene conversion to the merits of the private sector which is wholeheartedly to be welcomed.
My hon. Friend the Member for Twickenham (Mr. Jessel), who also spoke in complimentary terms about my right hon. Friend's Budget, rightly emphasised the importance of getting inflation down. That is the major theme of the Budget and of the debate. Unless we get inflation down we cannot build for growth and prosperity in the future.
Several hon. Members talked about local government, and properly so because it featured in my right hon. Friend's Budget statement. I must ask them to contain their impatience until tomorrow, in particular the hon. Member for Londonderry, East (Mr. Ross), who asked several specific points. Those points will be dealt with in due course, but I must ask the hon. Gentleman to contain his proper inquisitiveness until then.
In the Budget there are several tax reform issues which take forward the Government's firm commitment steadily to reform the tax system where necessary. There is a consultation document on foreign exchange gains and losses—not, I accept, a glamorous subject, but it is important—in which we present proposals that we believe will bring rationality to a difficult aspect of the tax code. We have also presented a consultative document on resident trusts. That is the outcome of a review that was announced by my right hon. Friend when he was Financial Secretary to the Treasury. Again, that document would rationalise the law in a way that will simplify it and make it more comprehensive and helpful. We proposed to bring forward a consultative paper on taxation of the self-employed. The present arrangements for taxing companies and the self-employed are complicated and inefficient.
We are already introducing a new system, "Pay and File", which will simplify the way in which companies pay tax. It is now time to streamline the arrangements for the self-employed. We propose changing one of the oddest features of the present system which is that in any year the self-employed are taxed on their profits in the preceding year. Under the new proposals, the self-employed would, like employed people or companies, pay tax for one year on the profits earned in that year. We believe that that would help to make the rules much simpler. We also have proposals to cut the regulation of the self-employed by the Inland Revenue, by giving the self-employed greater responsibility for settling their own tax, as happens in other countries. It will not be possible to implement the reforms for some years, but, if we are to take full advantage of the opportunity for radical and imaginative reform, we need to start planning for it now.
The Budget contained a number of proposals about deregulation of the tax system. Taxes inevitably place a compliance burden on taxpayers and it may frequently be necessary for businesses to play a role in administering the system to ensure that it is as cost-effective as possible. Periodically, we must look at ways of easing that burden where possible, and must always take into account the compliance costs when considering options for change. Of course, the best deregulatory measures are those that take people out of the tax system altogether. That is why my right hon. Friend the Chancellor announced a 40 per cent. increase in the value added tax threshold. It will mean that up to 150,000 firms will no longer have to register for VAT.
We have also reduced the burden of the tax system on small firms through our proposal to allow up to 700,000 small employers to pay their PAYE and NIC payments quarterly instead of monthly. That will help them by improving their cash flow—although I accept that it will do so only slightly—and by reducing their administrative costs.
Next year we shall increase the number of taxpayers who may submit simplified three-line accounts to the Revenue from 1 million to 1·5 million. Again, that means a substantial reduction in compliance costs for those in business.
My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) asked yesterday about the proposed tax relief on vocational training and whether it would extend beyond examination fees, and tuition and course fees. The relief is intended to be given at source. Repayment systems always cause delay and confusion, so we propose that tax offices will be involved only in reimbursing organisations that provide qualifying relief and individual taxpayers who are entitled to relief at the higher rate. Because it is relief at source, it is not possible to extend it to travel, subsistence or accommodation costs or to the cost of books or equipment——

Mr. Hill: I observed earlier that it seems unnecessarily harsh that married couples should not have any increase in their tax-free allowance. I was told during the debate that that hinged on child benefit, but I can scarcely believe it. Will my hon. Friend look again at this matter because we are the party of the family, and married couples should receive an increase in that allowance?

Mr. Maude: I am sorry that I missed my hon. Friend's speech. He is right that we do not propose to increase the married couple's allowance this year. My right hon. Friend


the Chancellor decided that the benefit for families should be directed this year at families with children, and especially the first child. I know that that seemed eccentric to my right hon. Friend the Member for Chesham and Amersham, but the main cost on a family comes with the arrival of the first child because that is generally when the mother has to stop work and other costs arise. If it is desirable—as we believe that it is—to target help on families with children, almost by definition it is less sensible to give help by way of the married couple's allowance to families without children.
This is a Budget for business. That is not just a slogan; it has been recognised as such by everyone from the business world who has commented on it. It will cut the administrative burden of the tax system and will help the cash flow of businesses.

Mr. Harry Ewing: The Chief Secretary made no reference to expected levels of unemployment. I suspect that the Minister is about to finish his speech without making any reference to them. Within the context of its being a so-called Budget for business, will he comment on the fact that tomorrow morning British Aerospace will announce 3,500 redundancies?

Mr. Maude: Clearly I cannot comment on that, except to say that if it is the case., I regret it. Obviously we all regret any loss of jobs. We have been frank about unemployment. The economy is going through a recession and a difficult time and unemployment is increasing. My right hon. Friend the Chancellor said clearly that it will continue to increase for a time, but there is no forecast. There is nothing surprising about that. So far as I am aware, no Chancellor has ever made a forecast of unemployment.
The Budget will release new money for investment—money that would otherwise have been taken by the taxman. There has been a clamour from the Opposition for capital allowancs to be changed. They want a return to the 1970s when there were over-generous tax incentives for business investment. It was not necessarily good investment; indeed, it was often the reverse.
The present system allows businesses to decide for themselves how much to invest. Decisions are taken on economic and commercial grounds and are not driven by tax. More generous capital allowances would deliver a subsidy through the tax system. They can make a bad investment look like a good one. They can make investing in expensive machinery look more sensible than employing extra staff, even when commercially the opposite is true.
Changes to capital allowances could distort business decisions in favour of capital against labour. It sounds surprising that the Labour party should want a tax system that favours capital investment rather than employment. It is odd until we look at what happened in the socialist economies of eastern Europe. They, too, thought that investment in capital was an end in itself. We all know

what happened there—massive inefficiencies, bloated heavy industries and inflexible economies. Capital investment in Yugoslavia in the late 1980s was running at 38 per cent. of gross national product, double the rate here. Investment is a means to an end, not an end in itself. The end to which it is a means is improving business performance and profitability and underpinning economic growth. That is why our approach encourages companies to take investment decisions on business rather than on tax considerations. That must be right.
Following the 1984 reforms, business investment grew dramatically. In the three years to 1989 investment grew by 43 per cent. to reach an all-time high. Despite the recession, business investment remains at historically high levels. When profitability starts to recover next year, companies will be well placed to benefit from the upturn in activity as inflation drops. Therefore, the Budget will encourage further investment—not any old investment just for the sake of it, but worthwhile investment justified on commercial grounds. It will leave businesses with more of their own money to invest as they judge right. It is worth repeating that my right hon. Friend has cut corporation tax for next year by a full 2 per cent. to 33 per cent., the lowest rate of corporation tax in the European Community and among the G7 countries. At the same time companies will be able to carry back trading losses against profits in the previous three years.
All those measures will provide extra money which would have been taken by the taxman and will leave it with the companies for them to invest, if they choose to do so. For all the sneering from the armchair managers in the Opposition, it is clear that those who are running businesses agree with our judgment that the Budget will benefit businesses by removing burdens and by increasing cash flow.
The right hon. and learned Member for Monklands, East (Mr. Smith) had a good joke about misdeclarations. We all thoroughly enjoyed it. But I suspect that he began to feel uncomfortable with it when his shadow budget came in for some scrutiny. My right hon. Friend the Chief Secretary asked him some searching questions about it, but he did not give any answers. I was rebuked in a previous debate for not giving way to the right hon. and learned Gentleman, but if I had time I would willingly give him an opportunity to set the record straight so that we could know the answers.
The shadow budget that the right hon. and learned Member for Monklands, East set out is the greatest case of a serious misdeclaration that I have ever come across. Either the figures are simply wrong and he would not raise anything like the money that he claimed from his measures, or he is short-changing people either by robbing those who have already received benefits of those benefits or by keeping the benefits of children——

Debate adjourned—[Mr. Boswell.]

Debate to be resumed tomorrow.

Orders of the Day — Nuclear Test Veterans

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boswell.]

10 pm

Mr. Jack Ashley: The spectacle of the British Ministry of Defence fighting British ex-service men with the same determination it shows to enemies of the country is disgraceful. Nuclear test veterans have been victims of not only radiation but hostility, miscalculation, dogmatism, meanness and complacency by the Ministry of Defence.
Tonight, I want the House, and the MOD, to consider new evidence which supports the claims of nuclear test veterans, but first I want to look at the National Radiological Protection Board's report. This scientific report was scandalously distorted by political presentation. The crucial "Conclusions" page began:
It is concluded from the study that participation has not had a detectable effect on the participants expectation of life nor their total risk of developing cancer.
Then, almost as an afterthought, it says:
apart from a possible effect on the risks of developing Multiple Myeloma and Leukaemia".
People died of multiple myeloma and leukaemia.
The report could, and should, have opened with the sentence, "Participation may have caused death from multiple myeloma and leukaemia although not from other cancers." Instead, it opens with a disclaimer and buries in a long paragraph this revealing comment:
There may well have been small hazards of leukaemia and multiple myeloma associated with participation in the tests".
It is not surprising that, as a result of the detail of the report, the Department of Social Security is now paying pensions for multiple myeloma and leukaemia. Fortunately, it does not have the gall to demand rigid proof of causation, as does the MOD.
Why is the MOD persisting in its harsh interpretation of the report? The Minister must be aware of the supporting evidence for the test veterans' case. Although the Australian Commission was not a full epidemiological study, it concluded:
Their exposure to radiation in the trial programme has increased the risk of cancer among 'nuclear veterans'".
The Minister must also know that the epidemiological New Zealand study found a fivefold increase in the risk of death from leukaemia among test veterans—a figure comparable with the three-and-a-half times figure found by the NRPB report. The New Zealand study concluded that the relationship was likely to be causal because a similar excess risk was found in the British study. Two distinct studies found additional risk for the veterans. That cannot be dismissed.
The MOD is burying its head and shutting its eyes and its mind to existing evidence. It prefers to wait for the follow-up report from the NRPB, which is not due until 1992, by which time even more veterans will have died without compensation. That is shifty, evasive and deplorable.
I sent the Minister a copy of my speech in advance so that he might be able to respond constructively to what I am about to say. The new evidence was revealed in the excellent Scottish Television programme "Dispatches", researched by Eamonn O'Neill. The programme claimed that, on 28 April 1958, in the Grapple Y test—the second off Christmas island—the megaton nuclear explosion was

at a much lower height than the 8,000 ft officially reported. This lower height would have substantially increased the radioactive fallout because a low-level explosion sucks up material that becomes heavily radioactive. Where that material lands, when it falls back to earth, is a matter of life and death. The programme claimed that a violent rainstorm occurred, and radioactive rain poured on to Christmas island, drenching the men, soaking the ground, and polluting the lagoons.
Will the Minister confirm or deny that the explosion was at a low height, that material was sucked up, and that it fell back with the rain on to Christmas island and into the seas around?
It is also claimed that the explosion took place just one and a half miles away from Christmas island, and not at the official distance of five miles. If this is the case, it is even more likely that the island became contaminated. If the Minister says he has no information, I will bring a deputation to see him to support the television claims. They must be investigated and cannot be ignored.
On the crucial question of safety, the Government are on record as claiming that adequate precautions were taken to protect the men. Dosimeters were used to measure individual exposure to radiation, and it is said that no one was at risk, but inferior film was used in those days. It was not sensitive to low doses. It reached only to gamma radiation and not the more dangerous beta radiation. Will the Minister confirm this? I do not mind being interrupted at any stage. The most damaging claim, supported by the NRPB report, is that exposure to internal contamination could not be recorded on the dosimeters.
These are crucial points, because much of the Ministry's safety claim rests on the fact that exposure to gamma radiation was measured, and that it was at a safe level. If there was no measure of beta exposure, or exposure from internal contamination, there can be no valid claim of safety; it has all been a mirage. Nor can there be any confidence in the argument of the NRPB in its report that there was no association between exposure to radiation and excess leukaemia and multiple myeloma. If it knew about only part of the exposure, discussion of the issue is fruitless.
Far more relevant is the following suggestion in the New Zealand report:
The possibility cannot be excluded that there could have been significant external exposure to neutron radiation or internal exposure due to inhalation or ingestion".
It is also significant that the greatest relative risk of excess leukaemia was suffered by men thought by the MOD not to have been exposed to radiation—by that is meant external gamma radiation. Could those men, who suffered more leukaemias than others, have ingested fatal beta radiation doses unknown to the MOD? Could that have happened because the cloud of radioactive material over Christmas island was washed down by rain and entered the food chain?
Does the Minister know whether the water on Christmas island, used for drinking and washing by the men, was regularly checked for radioactivity? Was the water on the south side of the island, where the men swam and caught fish, checked for radioactivity? Again, the House is entitled to answers.
Despite claims by the MOD that radiation levels found in fish were minimal, evidence was put forward in the television programme that one of the scientists found that


his geiger counter went berserk when checking radioactivity in some of the fish caught off the south-east point of the island.
Much concern and many unanswered questions have emerged from just one well-researched television programme. Are they the tip of the iceberg? That question can be answered only by a judicial inquiry, and I repeat my request for one. The urgent task is compensation for the veterans while they are alive to benefit from it. The United States Congress was persuaded that there could be no certainty that the tests were safe. Its nuclear test veterans were given the benefit of the doubt. No rigid proof of damaging exposure was demanded. American test veterans now get compensation if they develop any one of 15 cancers.
In Britain, only the nuclear industry has moved. In January of this year, as part of a compensation agreement, British Nuclear Fuels plc paid out £150,000 to the widow of a former plant worker who died of leukaemia. What has been the response of the MOD? Officially, nothing but statements that proof is required and that the study must be awaited. In military parlance, the MOD is cowering in its bunker. It is afraid of the truth. However, just yesterday, it was confirmed in a parliamentary reply to me that the Ministry is investigating the merits of a compensation scheme for radiation-linked disease—similar to that operated by BNFL. Let me warn the Minister that, if the scheme does not include the nuclear test veterans, there will be uproar. Will the Minister tell us tonight just what is stirring within the timid body of the MOD?
Our nuclear test veterans deserve compensation to rank with that given elsewhere. They have suffered injustice since the 1950s. Successive Governments have failed to help them. Many of them are dying with great suffering. They, and their widows, feel what I can only describe as a dignified bitterness. It is time for the Government to put an end to this shameful episode in British military history.
I hope I shall not receive a negative response tonight from the Minister. Perhaps he will recall the words of the Prime Minister, praising the dedication and heroism of our men in the Gulf. He should bear it in mind that praise is not enough. What the men need is justice.

The Minister of State for the Armed Forces (Mr. Archie Hamilton): I congratulate the right hon. Member for Stoke-on-Trent, South (Mr. Ashley) on obtaining this Adjournment debate. He has, over the years, persistently campaigned for compensation for those personnel who participated in the United Kingdom's nuclear test programme. I applaud him for his diligence and dedication and I also thank him for giving me prior notice of the points that he made in his speech. He is well aware" Mr. Speaker, that the nub of the matter is the need to prove causation—that is, a causal link between participation in the programme and any subsequent illness. I emphasise at the outset that there is no such evidence.
The young men who took part in the test programme are now middle-aged or elderly and, inevitably, will begin to suffer from the sort of illnesses that might befall all of us as we grow older. The fact is that the incidence of cancer in the participants closely matches that in the normal population.
The question of the nuclear test veterans is, as I say, not new and has been discussed in the House at length. The House will recall the considerable discussions that took place on the subject in 1990, when attempts were made to introduce an amendment to the Social Security Bill to permit the payment of compensation to those service men who participated in the test programme and who subsequently contracted various cancers which they attribute to their involvement in the tests. The proposal was, after much debate, rejected.
Considerable concern has been expressed in the House and elsewhere about the nuclear weapons test programme conducted in the south Pacific in the 1950s and the suggestion that those who took part in the tests have now developed illness as a result of their participation. The concern is understandable. The widespread publicity given to the allegations, and the potentially harmful effects to which radiation can give rise, have considerably added to public anxiety and concern. Cancer is a common cause of death in the developed world; indeed some 20 per cent. of deaths can be attributed to the disease. There are, tragically, more than 100,000 cancer-related deaths a year in this country. It has been estimated that some 1,000 of those deaths may be caused by the various natural sources of radiation all round us. Many participants in the test programme, therefore, would by now be suffering from cancer, or would have died, if they had spent their service entirely in this country and never gone to the south Pacific. It is inevitable, however, and in the circumstances understandable, that many who have developed cancer should attribute their illness to the after-effects of the bomb tests.
The nuclear safety standards implemented during the tests bear favourable comparison with the standards in force today. Individuals who were liable to be exposed to radiation were issued with dosimeters to record the radiation experienced. The safety regulations in force were consistent with recommendations of the International Commission on Radiological Protection and advice from the Medical Research Council. The Government have confirmed that safety precautions were properly monitored and stringently implemented.
While the Government have remained confident over the years that the safety precautions were adequate and that participants were not subjected to any significant health hazards, they have been anxious to alleviate their fears. Bearing in mind the difficulties in determining causation, it was decided that there should be a study to provide up-to-date and reliable information to show whether a problem existed and, if so, its extent. In October 1983, the National Radiological Protection Board was commissioned to undertake a study of the participants and investigate any correlation with radiation exposure. The study compared the mortality and cancer incidence of more than 22,000 men who took part in the tests with a similar group of service men and civilians who were not involved in the tests.
The study, the results of which were published in the British Medical Journal, concluded, as the right hon. Member acknowledges, that participation in the tests had no detectable effect on the participants' life expectancy. Nor did the study establish a causal relationship between the incidence of cancer and participation in the nuclear test programme; and, in particular, there was no evidence of


increased incidence of any cancer with increased radiation dose, contrary to what might have been expected if those cancers were radiation-induced.

Mr. Ashley: I am absolutely incredulous at the Minister's speech. Does he deny that the report to which he referred said:
There may well have been small hazards of leukaemia and multiple myeloma associated with participation in the tests"?
Will he deal with the new evidence which I have raised and which was brought forward in a television programme, bearing in mind that the Americans are paying their veterans and have given them the benefit of the doubt? Why cannot the Minister give the benefit of the doubt to our veterans?

Mr. Hamilton: As to the specific parts of the study, the right hon. Gentleman anticipates me; I am about to come to leukaemia and multiple myeloma and will also refer to the American compensation scheme.
As the right hon. Member said, the study showed a small but statistically significant increase in the incidence of certain leukaemias and multiple myeloma in test participants, compared with the control group. However—I think he would also acknowledge this—the control group exhibited an extraordinary low incidence of those two cancers compared with the average for England and Wales and the NRPB concluded that those differences were likely to be largely due to chance.
The right hon. Gentleman criticises the NRPB's presentation of its conclusions. I can say only that the NRPB is an independent and internationally respected scientific institution. Its report was well received by the medical community and has not been criticised by any of the leaders in epidemiology. Internationally accepted estimates of risk from radiation predict that not one person would be expected to die as a result of exposure to radiation from the United Kingdom test programme.
The Government regard the result of the NRPB study as vindicating their view that the safety precautions adopted during the test programme were effective. The report went on to recommend that observations on the groups of participants and controls should be maintained for a further 10 years and the Government were pleased to accept that suggestion. The NRPB will, therefore, continue to monitor the cancer and mortality incidence of the participants over a 10-year period and will publish an updated study next year.
I now turn to the specific points made by the right hon. Gentleman. I must say at the outset that the irresponsible and sometimes misleading allegations made by the "Dispatches" television programme, from which the right hon. Gentleman drew many of his points, were based on a series of factual inaccuracies. The unfounded allegations made by the programme can only add unnecessarily to the concern and anxiety of those who participated in the nuclear test programme and their relatives.
An example is that the programme showed some people wearing special clothing but not radiation badges, the implication being that the participants were being improperly protected and monitored. The clothing was used, in fact, as protection against the intense heat flash from the detonations. As they were located at a mustering

point at least 34 km from ground zero at the time of detonation, the dose from the flash radiation would have been zero.
The right hon. Gentleman mentioned the United States compensation scheme. What he knows, but has failed to tell the House, is that the scheme works where people are present at a detonation and within 20 miles of it. As he will know, the vast majority of people on Christmas island were 34 kms away and so would not have been eligible for compensation under the American scheme if it had been operating. Similarly, it would be absurd to contend that participants who were upwind of the tests could have been exposed to radioactive fallout. As a result, there would have been no necessity to issue them with film badges.
The programme also alleges that the Grapple Y test went wrong. If that is the case, it follows that those responsible for the conduct of the tests either deliberately connived in a massive deception or that they unknowingly did not correctly interpret the manifestations at the time and were thus guilty of negligence or professional incompetence. The records show that the Grapple Y test was detonated at a height of 8,000 ft at the intended diagonal distance of 2·5 km from the point of bomb release to the detonation point, corresponding to a distance of 1·7 km from the south-east point of Christmas island.
I am mystified by the allegations in the "Dispatches" programme that the official detonation distance from Christmas island was meant to be 5 miles or 8 km. There are no official records to support this. In terms of exposure of participants, of course, it would have made no difference if the weapon had been detonated at 8 km or zero km from the south-east point of the island. Doses at the nearest mustering point would still have been zero.
The main evidence in the television programme to support the allegation that the bomb detonated at 800 ft is the statement made by Captain Stewart, who was a co-pilot of a Shackelton flying on a shipping patrol some 60 miles away, as he said himself, at the time of detonation. At such a distance much of the evidence on which to base an eyeball estimation is below the horizon and he could not have seen the point of detonation. If the detonation had occurred at 800 ft, large amounts of water would have been sucked into the cloud giving rise to massive fallout over parts of the island. If test veterans had been exposed to that fallout, as the programme implied, severe symptoms such as nausea, vomiting and beta burns would have been manifested within hours of the detonation among all participants, with deaths from radiation sickness some weeks later. No such symptoms were observed. Furthermore, the radiation from that fallout would have been impossible to hide since it would have been apparent in the fallout pattern over the entire world.
The "Dispatches" programme alleges that there was heavy rain off Christmas island on 28 April 1958 which substantially increased the amount of radioactive fallout. All that I can say to the right hon. Gentleman is that, shortly after the test, extensive environmental monitoring did not measure any deposition of radioactive materials from the detonation. On the basis of that evidence, therefore, there could have been no exposure to internal contamination as a result of inhalation, as suggested by the right hon. Gentleman. I confirm that sea water from swimming areas, drinking water, fish and locally gathered foods, such as coconuts, were continuously sampled and no traces of radioactive contamination were found.
The programme further alleges that the instruments used to measure radiation during the Grapple megaton nuclear bomb tests were not capable of measuring beta radiation. Of course, that allegation is totally without foundation since the instruments used on the nuclear weapon tests were of the beta/gamma type, capable of measuring both types of radiation.
The right hon. Gentleman asked what criteria were used to designate areas of Christmas island safe or not safe. Any area or task in which it was expected that there might be radiation doses that were not trivial, or where pessimistically there might, however unlikely, be a possibility of exposure to radiation that was not trivial, was identified and entry to it stringently controlled. All persons entering such areas, or who might have to undertake tasks with radiation or radioactive substances, were issued with personal film badges. Additionally, the levels of radiation throughout the island were known and, in places occupied by the participants, the levels did not differ from the ever-present background and were considerably less than would have been experienced in the course of living in the United Kingdom.
There are many factual errors in the New Zealand study entitled "Mortality and Cancer Incidence in New Zealand Participants in United Kingdom Nuclear Weapons Tests in the Pacific". Those errors were pointed out to the New Zealand authorities before publication, but were not amended in the final report. As an example, the authors assumed that the average dose to which Royal New Zealand navy personnel were exposed to be identical to that received by Royal Navy personnel—taken to be 5·2 mSv. In fact, the duties of the respective navies were quite different. The closest that the New Zealand ships ever

approached ground zero at the time of any of the detonations was 40 km upwind and their dose was, therefore, not significantly different from zero.
A further factual error is the statement in the New Zealand report that
there could have been significant external exposure to neutron doses".
It is irrefutable that neutron doses at a distance of 40 km from ground zero at the time of detonation were zero. Indeed, the total dose from all sources of radiation, neutron and gamma, was trivial at a distance 7·5 km from ground zero, and the neutron dose would have been a small fraction of this. But if any nuclear test participant had been close enough to receive a measurable neutron dose he would have been killed instantly by accompanying blast and thermal effects.
It is a salutary lesson on the vagaries of statistics that, despite exposure levels to radiation from the tests being zero, an increased incidence of leukaemia compared with the average of New Zealand is still documented in the report. I should also point out to the right hon. Gentleman that the New Zealand report found no increased incidence of multiple myeloma.
The right hon. Gentleman asks if I will place in the Library a copy of an unpublished paper by Dr. Headley Marston on the fallout of strontium 90 from nuclear explosions. I regret that, despite searches initiated by the Department of Primary Industries and Energy in Australia, for which I am grateful, the document has not yet been traced.

The motion having been made at Ten o'clock, and the debate having continued for half an hour, MR. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.